Airports: Immigration and Security

Lord Naseby: asked Her Majesty's Government:
	What steps they are taking to secure compliance with immigration and security rules in relation to passengers travelling abroad using private aircraft or non-scheduled flights from and into smaller airports.

Lord West of Spithead: My Lords, the UK Border Agency, with the police, pursues an intelligence-led, risk-based approach to controls on general aviation. Passengers are required to provide specific information before take-off. In future, this will be combined with the e-borders programme, to ensure that information is used most effectively, allowing the most appropriate deployment and follow-up action. We are working with all involved to identify additional measures necessary in this area.

Lord Naseby: My Lords, that all sounds very good, but is not the reality such that the flight plan is filed giving the number of passengers, but nobody checks whether that number actually get on board the aircraft? On the way home they certainly do not check the numbers getting on board. The net result is that the smaller airports are just a leaky entry into the UK.

Lord West of Spithead: My Lords, I do not think that that is completely true. This is an area of concern which I raised last summer when I came into post, and we have done considerable work since. To put it into context, we must realise that 99.5 per cent of everyone coming in and out of this country goes through the top airports and ports, which are covered 24/7. We use Special Branch, the police, local communities, pilots and owner-operators to make sure that we liaise and talk things through to try to cover the loopholes. The system is not perfect yet but we are working hard down that route.

Lord Avebury: My Lords, does the noble Lord agree with my noble friend Lord Carlile, who said in his most recent report, published in June, that there is a measurable risk of executive jets being hijacked and used for terrorist purposes? If so, while many companies adopt reliable and effective procedures to counter terrorism, does the noble Lord think that the Government should impose statutory standards on the operators of private jets, or at least that there should be guidance issued on the procedures adopted to stop terrorists gaining control of these aircraft?

Lord West of Spithead: My Lords, again it is a question of scale and should be looked at on a risk basis. There are about 480 or 490 small aerodromes around the United Kingdom. To cover them all, with people there 24/7, would be extremely resource-intensive. We liaise closely with local communities, the police, Special Branch, and the airlines. We have had some good success rates in stopping people smuggling stuff into the country and with various other operations. Although it is not ideal, we have to keep a balance, and we are moving down the right route.

Baroness Hanham: My Lords, in terms of the normal burden of passengers travelling out of the main airports, what progress has been made on the e-borders programme? Has the "authority to travel" capability, which the noble Lord advised me in May was due to be introduced in October this year, been introduced? If not, why not?

Lord West of Spithead: My Lords, I shall come back to the noble Baroness on the details as I am not completely clear whether that has happened. As regards e-borders themselves, we have identified who will be proceeding with the various parts of that programme, which is on track. It will make a great difference because we will be able to check people not only into but out of this country. That was stopped in 1994, but it is crucial if we are to monitor numbers and other things involving counterterrorism.

Lord Mackenzie of Framwellgate: My Lords, with the increase in the use of stolen passports and stolen identities, does my noble friend agree that the sooner that we move towards biometric identifiers, in many cases, the better?

Lord West of Spithead: My Lords, I agree totally with my noble friend; that is extremely important and will make things a lot easier for us. That does not mean that people cannot try to copy biometrics or use them fraudulently, but it is very difficult and will give us a much better feel for what is going on.

Baroness O'Cathain: My Lords, are all major airports—not flying strips—now covered by the Border Agency? In asking that I point out—for once, I am going to give great congratulations to the Government—that when coming back into Britain now through airports covered by the Border Agency, you are treated like a human being, staff actually smile and you feel welcomed to Britain.

Lord West of Spithead: My Lords, I am taken aback; it is so nice to have something like that said. I agree; I think that the fact that staff are in uniform makes a difference as well. I know that some people in the agency itself did not like that, but now they are warming to it. It makes them look more efficient and works better. As I understand it, the 30 major airports are all covered 24/7. If that is incorrect, I shall get back to the noble Baroness.

Lord Corbett of Castle Vale: My Lords, can my noble friend explain what arrangements are in place at marinas to monitor those who exit the country and return on yachts?

Lord West of Spithead: My Lords, my noble friend is unfairly picking on an admiral. Rather like general aviation, that is an extremely difficult area with which we are trying to grapple and have been since last summer. There are millions of movements of small boats, and we are grappling with how to monitor them properly in future. How we fit that in with e-borders is quite complicated, and I do not yet have a clear vision of how that will happen.

National Muslim Women's Advisory Group

Baroness Warsi: asked Her Majesty's Government:
	What advice they have received from the National Muslim Women's Advisory Group since it was established in November 2007.

Lord Patel of Bradford: My Lords, the Secretary of State for Communities and Local Government formally launched the National Muslim Women's Advisory Group in January 2008. This is an independent informal group to advise the Department for Communities and Local Government on issues to empower Muslim women and increase their participation in civic, economic and social life. The group also contributes to cross-government work on issues affecting Muslim women.

Baroness Warsi: My Lords, I welcome the Minister to the Dispatch Box and thank him for his reply. Can he confirm that the National Muslim Women's Advisory Group met in May this year and identified three areas of work that it would take forward; can he explain what initiatives, if any, have been identified to do so; and can he further explain what evaluation process is in place, if any, to assess the effectiveness of any initiatives?

Lord Patel of Bradford: My Lords, I thank the noble Baroness for her kind remarks about my presence here. Since its establishment in January, the National Muslim Women's Advisory Group has contributed to a number of areas of government policy, such as the preventing violent extremism agenda, and to a number of cross-government support groups. It is embarking on three projects: one to improve the media presence of Muslim women and to address the stereotypical views that have been portrayed by many; one on capacity-building and leadership in civic establishments; and one to ensure that Muslim women are represented across the board and have leadership skills. The projects have not yet been funded, although funding is earmarked. Once that has been put into place, an evaluation process will be established.

Baroness Prosser: My Lords, does the Minister agree that the establishment of various Muslim women's advisory groups in recent years has been one of the mechanisms that have enabled Muslim women to make a significant contribution to developing community cohesion and to society generally?

Lord Patel of Bradford: My Lords, I agree. Muslim women's advisory groups have contributed immensely over the years to a number of government areas. Muslim women play a key role in helping to address alienation and disfranchisement among families and young people, and have a pivotal role particularly in community cohesion. That is why we support the development and engagement of women both nationally and locally as active leaders and advocates. Muslim women in particular face a number of barriers to being actively involved, including low unemployment, low skills and stereotypical negative views, and we are working with them to overcome many of those barriers.

Baroness Falkner of Margravine: My Lords, I, too, welcome the Minister in his debut role. He set out what the National Muslim Women's Advisory Group was set up for, but he has omitted to mention that a vital part of its work is to prevent violent extremism. Of the 19 women in the group, only three have any background in dealing with extremism, and there is no political scientist or researcher on extremism among them. He emphasises the group's economic and social role, but what kind of advice does he expect to get from people who are clearly not expert in the area with which the group was set up to deal?

Lord Patel of Bradford: My Lords, I thank the noble Baroness for her kind remarks. This is an advisory group of 19 women who are very talented and have a great breadth of experience in the media, in journalism and in academic life, but particularly in working with communities on social action. I understand the point about tackling violent extremism. We do not expect only this group of women to address a very complex set of issues. We have hundreds of projects involving local women at a local and regional level that also contribute. I accept that only some of the group have experience in this area of work, but their contribution to civic leadership and knowledge and to community work is just as important.

Baroness Massey of Darwen: My Lords, how many Muslim women and young people have benefited from the work on promoting leadership?

Lord Patel of Bradford: My Lords, in the financial year 2007-08, the Department for Communities and Local Government invested in a leadership programme that funded 24 projects. I am pleased to say that more than 120 Muslim women and young people have benefited from that work. It is a very successful programme, and it has been greatly welcomed by the people and the communities involved.

Lord Skelmersdale: My Lords, it is important, is it not, that members of ethnic minorities should relate to the police forces up and down the country, especially when one is talking about extremist activities but for other reasons as well. How many ethnic minority women have joined the police service?

Lord Patel of Bradford: My Lords, I cannot give the exact figures, but I imagine that not enough ethnic minority women are in police forces across the country. We certainly need to do a huge amount more with police forces and the community to build trust and confidence. The whole point of the DCLG programme is to build that trust and confidence, which will enable some of those women to say, "Yes, I will join the police force".

Baroness Warsi: My Lords, does the Minister accept that the creation of such groups is actually dividing communities and is patronising because it says to Muslim women, "You can engage with us only as Muslim women and not as individuals"?

Lord Patel of Bradford: My Lords, I must disagree with the noble Baroness. If it is suggested that by focusing on Muslim women we are somehow patronising them or creating divisions that were not previously there, I disagree completely. It is through working with the community that one has a chance to address the disproportionately high risks of unemployment, low educational attainment and poor health. These lead to disenfranchisement and alienation, particularly among Muslim women who do not have the opportunity to address these issues. We cannot address them unless we engage with Muslim women, just as we do with a wide range of faith groups on many issues.

Baroness Howarth of Breckland: My Lords, is it not crucial that we engage groups such as this because there are real difficulties in getting ethnic minority women into certain organisations? I speak particularly as someone who served on the inquiry into organ donation, which highlighted the need for women who understand their communities to be able to persuade other women to accept the health provisions available that will help them to better health.

Lord Patel of Bradford: My Lords, I could not agree more with the noble Baroness. Last summer I was privileged enough to visit 12 local authorities where I saw around 800 people and met some remarkable women who are not engaged in some of our policy areas, but need to be. The extent of their knowledge and level of commitment was notable. Projects like this help us to move in that direction.

Defence: EU-NATO Co-operation

Lord Astor of Hever: asked Her Majesty's Government:
	What steps they are taking to promote synergy and reduce possible friction between NATO and the European Union on defence matters.

Baroness Taylor of Bolton: My Lords, I am sure that the whole House will wish to join me in offering sincere condolences to the family and friends of Trooper James Munday, who was killed on operations in Afghanistan on 15 October.
	The Government agree that a close relationship between NATO and the EU is essential, and we place priority on fostering synergy and reducing possible friction. We are urging our allies and partners to ensure that all necessary steps are taken to allow NATO and the EU to support common objectives in Afghanistan, Kosovo and elsewhere. We also support closer co-operation on military capability development.

Lord Astor of Hever: My Lords, from these Benches we also send our condolences to the family and friends of the trooper in the Household Cavalry Regiment who was sadly killed.
	Does the Minister endorse her Secretary of State's enthusiastic support for a European army, as reported in the weekend's press? Can she tell the House why it was necessary for the MoD to put out a statement this morning that supposedly clarified his views?

Baroness Taylor of Bolton: My Lords, it was necessary for the MoD to clarify my right honourable friend's views because the statement attributed to him was not actually made. The Secretary of State does not back a European army. The UK's policy remains that there will be no standing European army, navy or air force; there has been no change in that situation.

Lord Lee of Trafford: My Lords, these Benches join in the earlier tribute.
	Given that the position and attitude of France is clearly pivotal in the overall relationship between NATO and the EU, is the noble Baroness encouraged by the fact that the French forces recently deployed as reinforcements in Kapisa, in eastern Afghanistan, are under American command?

Baroness Taylor of Bolton: My Lords, it is quite true that the attitude on the part of the French has changed significantly since the election of President Sarkozy. He has made it clear that he wants France to play its full part in NATO, and it is advantageous to all of us that France is engaged in Afghanistan in this way. We would like all those involved in NATO to play their full part and to improve the situation in terms of burden-sharing.

Lord Pearson of Rannoch: My Lords, does the noble Baroness agree that the inspiration for the European Union's military ambitions comes largely from the French with their unfortunate ingratitude to the United States of America for saving them in two world wars? Until that attitude is cured, friction within NATO can only continue.

Baroness Taylor of Bolton: My Lords, I do not think that that is an accurate description of where we are now. It is clear that President Sarkozy has renewed the connection and ties with NATO and the degree of discussion that he has with other partners. That has to be in the interests of everyone, as is the French presence in Afghanistan that I mentioned earlier. We need NATO to work closely with the rest of Europe. We should not view NATO and Europe as being somehow in competition but see them as complementary to each other. There is a great deal of scope for that.

Lord Wallace of Saltaire: My Lords, does the Minister agree that the idea of a European army is most strongly floated in two sectors of opinion: first, the Europhobe lobby in Britain and Ireland; and, secondly, the soft Left in Germany and Belgium, who want to have a European army but do not want it to have to do anything? Does she further agree that co-operation among armed forces in Europe is very different from the concept of a European army, very much in Britain's interest, and, indeed, a necessary part of the further development of an effective defence policy for the United Kingdom?

Baroness Taylor of Bolton: My Lords, I do not always agree with the noble Lord on some of these issues but I agree with him today. Very few people are actively promoting the concept of an active European army, and perhaps that is not surprising because we do not have a NATO army or a United Nations army. All the actions that we enter into are the result of voluntary decisions. We are not obligated to be in Afghanistan or Iraq, we are doing it because we think that it is right. I think that that is how the situation will remain. Not many people other those who are very frightened of the concept of a European army are talking about it at all.

Lord Sewel: My Lords, given that several EU member states impose significant caveats on their troops in Afghanistan, does the Minister consider that the idea of a European army as an effective fighting force is a bit of non-runner?

Baroness Taylor of Bolton: My Lords, it is true that many countries, even when they are co-operating in Afghanistan, have put caveats on the limits of their forces' activities. We could do with better burden-sharing and fewer caveats. However, we have made some progress and there are some important initiatives around, such as the UK-French initiative on helicopters where several countries are offering to provide helicopters or pilots and others will co-operate on training for operational purposes. So it is not all gloom and doom, but I certainly do not think that one European army is the way forward.

Baroness Knight of Collingtree: My Lords, is the noble Baroness aware that some of her answers today will have added to the confusion about whether there is or is not a European army? In the Council of Europe, of which I have been a member for many years, there is much talk of the European army and its existence, although we are told to call it the rapid reaction force so as not to frighten the horses. Does this army exist or does it not?

Baroness Taylor of Bolton: My Lords, it does not exist.

Lord Stoddart of Swindon: My Lords, I congratulate my noble friend on her statement about British policy on a European army, but could she make it absolutely clear to President Sarkozy that the British Government will not under any circumstances fall in with his plans and his desire for a European army? That would be very helpful indeed.

Baroness Taylor of Bolton: My Lords, perhaps I may remind the noble Lord of what President Sarkozy said on 17 June this year—not that it is my job to defend President Sarkozy. He stated that,
	"armed forces are and will remain national. They will not be integrated into any supranational force".

Palace of Westminster: Visitors

Baroness Massey of Darwen: asked the Chairman of Committees:
	How many visitors there have been to the Palace of Westminster in the past six months; and how that compares with previous years.

Lord Brabazon of Tara: My Lords, the number of visitors to the Palace of Westminster from April to September 2008 inclusive was an estimated 515,034. In the same period last year there were 556,823 visitors, and the same six months in 2006 saw 491,592 visitors. Although the overall number of visitors has dropped slightly since the same period last year, there were increases in the number of Parliamentary Education Service visitors and the number of visitors on the summer tours.

Baroness Massey of Darwen: My Lords, I thank the Chairman of Committees for that response. Does he agree that it is most important to get young people visiting Parliament and that the expansion of the Parliamentary Education Service and the Lord Speaker's initiative on visits to schools will enhance that? How many schools have visited Parliament in the past six months?

Lord Brabazon of Tara: My Lords, I entirely agree with the noble Baroness about the priority of young people and the work of the education service. I pay tribute to her for the work that she does with the education service, and to the Peers in Schools programme that has been developed recently by the Lord Speaker. It is of great importance and I encourage more Members to consider becoming involved in it.
	I cannot give the actual number of schools that have visited, but the total number of young people visiting through the education service has gone up enormously to 29,000 last year from 17,000 the year before, 11,000 the year before that and 9,700 the year before that.

Lord Wallace of Saltaire: My Lords, has the Lord Chairman read the editorial in this month's Country Life? I am sure he reads it as regularly and religiously as I do. The piece is entitled "Fortress Westminster" and talks about the deeply unwelcoming image that the Corus steel barriers give to visitors to the Palace of Westminster, and how that discourages visitors from seeing it as a welcoming place. In the context of trying to welcome visitors in, are we stuck with the Corus steel barriers as they are for the foreseeable future or are there any plans to make that space a little more welcoming?

Lord Brabazon of Tara: My Lords, it might surprise the noble Lord to learn that I have not read Country Life; it is not my regular reading matter. For the time being, however, the Corus barriers are here to stay.

Baroness Sharples: My Lords, does the Lord Chairman think that the facilities for disabled people are adequate?

Lord Brabazon of Tara: My Lords, I believe them to be so.

Lord Campbell-Savours: My Lords, is not the decision of the Mayor of London on Parliament Square most unfortunate?

Lord Brabazon of Tara: My Lords, the noble Lord should have raised that question last Thursday.

Lord Luke: My Lords, what effort is made to inform parties of visitors about the work of the House, not just of its history? When will the projected education centre come on stream?

Lord Brabazon of Tara: My Lords, plans for the education centre have advanced. Noble Lords will be glad to know that it is proposed to be in House of Commons territory; plans have been developed and a site has been identified underneath the Commons Chamber, on the Lower Secretaries' Floor. That was agreed by the House of Commons Administration Committee in May this year. However, it will take some time before it is built—2012 is the projected date. That is largely because of the need to find places elsewhere for those who currently occupy the space.

The Countess of Mar: My Lords, while we all appreciate that the security arrangements are necessary and keep us secure, are there any negotiations with another place about the timing of functions so that everyone does not arrive between 5.30 and 6.30 in the evening when functions are held at 6pm and 7pm so that there is not a backlog in the queues?

Lord Brabazon of Tara: Yes, my Lords, that is a problem particularly—well, entirely—with House of Commons functions: very many of them start at the same time, which causes a serious backlog at the Cromwell Green entrance. It should not apply to your Lordships' functions, because entrance to those is through Black Rod's Garden entrance.

Lord Faulkner of Worcester: My Lords, does the Chairman of Committees agree that the visitor experience would be greatly enhanced if the piece of waste ground opposite Parliament which used to be the Abingdon green were restored to its former state? Is he aware that the Written Answer he gave me on the subject last week was really rather disappointing because we were hoping to hear that work had resumed on the reconstruction of the car park and that the green was going to be restored, as part of that, as a matter of some urgency?

Lord Brabazon of Tara: My Lords, I think it is stretching the original Question to say very much about the green opposite; as the noble Lord says, I answered his Question for Written Answer last week. I hope that we will see the recommencement of work very shortly; new contracts are in process and, this being a problem for Westminster Council rather than ourselves, the plans are to complete the work by the middle of next spring.

Lord Elton: My Lords, will the Lord Chairman make it part of his brief, or make it someone else's, to keep an eye on the way in which the function of this House, in parliamentary apparatus, is displayed to the public in the various exhibition items that are put on view? It is my impression, from time to time, that they have been designed and organised by the other place, principally for an exhibition about how it works?

Lord Brabazon of Tara: My Lords, there is something in what the noble Lord says. However, we are assured that as far as the educational visits are concerned and especially when the education centre opens, the House of Lords will be given due prominence.

Lord Haskel: My Lords, does the noble Lord agree that the enormous improvements to the House of Lords website have given young people a lot more information and a lot more encouragement to know about the work of Parliament?

Lord Brabazon of Tara: My Lords, that is right, and those responsible for the website should be congratulated.

Baroness Trumpington: My Lords, as I frequently take visitors around this House and the Commons, I sometimes wonder, looking at the very, very tiny children who come here, how much they will learn about the work done here and about this place. Is there any age limit? I sometimes think that they come here when they are a little too young.

Lord Brabazon of Tara: My Lords, as the old saying goes, if you start them young, they will develop from there.

Torture (Damages) Bill [HL]

Lord Archer of Sandwell: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.

Moved accordingly, and, on Question, Motion agreed to.

Pensions Bill

Lord McKenzie of Luton: My Lords, I beg to move that the Bill be now further considered on Report.

Moved accordingly, and, on Question, Motion agreed to.

Lord McKenzie of Luton: moved Amendment No. 65:
	After Clause 87, insert the following new Clause—
	"Directors
	(1) A person who holds office as a director of a company is not, by virtue of that office or of any employment by the company, a worker for the purposes of this Part, unless—
	(a) the person is employed by the company under a contract of employment, and(b) there is at least one other person who is employed by the company under a contract of employment.
	(2) In this section, "company" includes any body corporate."

Lord McKenzie of Luton: My Lords, noble Lords may recall the debate in Committee about the impact of the employer duty provisions in the Bill on non-executive directors. That debate was instigated by an amendment tabled by the noble Baroness, Lady Noakes, who raised an interesting issue about whether non-executive directors were exempt from being automatically enrolled.
	We do not want to change the current market practice in relation to directors and have always considered non-executive directors to be outside the scope of these reforms. However, following further consideration and discussions with the noble Baroness, Amendment No. 65 is designed to avoid doubt by ensuring that a director with a contract of employment is included in the reforms, and a director with any other contract or letter is excluded. This would mean that unless a non-executive director has a contract of employment, they will not be automatically enrolled. Ultimately, if there is any ambiguity in a non-executive director's contract about their employment status, then a decision about whether they should be enrolled will have to be made on an individual basis. Any uncertainty about employment status will have to be resolved by looking at the contract and possibly the factual background of how the document came into existence, the intention of the parties and how the relationship operated.
	Amendment No. 65 also acts as a technical amendment to remove an anomaly in respect of sole worker-directors. Worker-directors pay themselves as a worker for their own company. Sometimes, they may be the sole worker in the company. In such cases, the Bill could create a situation where worker-directors would be required automatically to enrol themselves into pension saving and could then choose whether to opt out. Applying the duties in such cases would place unnecessary administrative burden on the worker-director, their scheme and the regulator.
	I hope that these measures have addressed the concerns raised by the noble Baroness. I thank her for her engagement and help on this matter. I beg to move.

Baroness Noakes: My Lords, I am grateful to the Minister for introducing the amendment and for responding constructively to the issues that I raised when I moved my amendment in Committee. It is helpful to have directors dealt with in the Bill. The more I research the issue and discuss it with the Minister and his officials, the more I realise that there is no simple answer to this issue, because much depends on the facts of individual cases. I support the approach that the Government have taken. I have just one plea: when the department or, as is more likely, the regulator issues guidance to employers on how to apply the Act, will they make it clear that the default or normal position is for non-executive directors not to be auto-enrolled except in particular circumstances, that being the purpose of the amendment that the Minister has just moved?

Lord Oakeshott of Seagrove Bay: My Lords, we, too, support the amendment and think it a very satisfactory outcome to our discussions in Committee.

On Question, amendment agreed to.
	Clause 96 [Interpretation of Part]:
	[Amendment No. 66 not moved.]

Lord McKenzie of Luton: moved Amendment No. 67:
	Clause 96, page 50, line 51, at end insert—
	""tax year" means the 12 months beginning with 6th April in any year;"
	On Question, amendment agreed to.

Baroness Noakes: moved Amendment No. 68:
	After Clause 96, insert the following new Clause—
	"Report to Parliament about costs and implementation of personal accounts
	(1) Before the end of six months beginning with the day on which this Act is passed, and annually thereafter, the Secretary of State must prepare and lay before Parliament a report setting out the matters referred to in subsection (2).
	(2) The matters referred to in subsection (1) are the Secretary of State's estimates of—
	(a) the amounts of money that have been incurred on personal accounts up to the date of the report together with an estimate of the amounts that will be incurred during the 10 years beginning with the date of the report,(b) the amount, if any, of the money included in the estimates under paragraph (a) which will not be recovered from charges to members of a personal accounts pension scheme,(c) the charges which will be borne by members of a personal accounts pension scheme, and(d) the date on which the personal accounts pension scheme will start to operate and the date on which it will, in the opinion of the Secretary of State, be fully operational.
	(3) References to the amounts of money incurred or to be incurred in subsection (2)(a) are to the amounts incurred by—
	(a) the Secretary of State,(b) the Personal Accounts Delivery Authority,(c) the trustee corporation referred to in section 73, and(d) a personal accounts pension scheme.
	(4) The charges which will be borne by members referred to in subsection (2)(c) shall be shown as an annual percentage of the sums expected to be invested in the personal accounts scheme or in any other way that the Secretary of State believes will provide a reasonable representation of the costs borne by members.
	(5) References to personal accounts are references to the relevant proposals about personal accounts under section 21 of the Pensions Act 2007 (c. 22) and the matters dealt with under Chapters 5 and 6 of this Act.
	(6) References to a personal accounts pension scheme are a reference to a scheme which has been or will be established under section 66 of this Act.
	(7) A reference to the personal accounts pension scheme being fully operational is a reference to the scheme being capable of making arrangements which fulfil the obligations of an employer under section 3 of this Act with any employer which wishes to do so.
	(8) If it appears to the Secretary of State that it would be prejudicial to securing the best value from the use of public money to publish any matter by including it in a report under this section, he may exclude that matter from that report.
	(9) This section shall cease to have effect on the day on which the Secretary of State makes a written or oral statement to Parliament that in his opinion the pension scheme established under section 66 is fully operational."

Baroness Noakes: My Lords, the new clause would introduce a requirement for the Government to make a report to Parliament on the costs and implementation of personal accounts. In Committee, we pressed the Government hard on various detailed aspects of the personal accounts scheme which the Government, with the assistance of PADA, are seeking to deliver. We did not get very far on any of the crucial issues about the costs of personal accounts or the likelihood of their being delivered by 2012. The Minister variously stood behind commercial confidentiality and the existence of some high-level information on implementation from the chief executive of PADA, which had been placed in the Library of another place.
	We have lent our support to the concept of personal accounts, but that support is not unconditional. No one can be expected to sign up to personal accounts at any cost or in any form that PADA considers itself capable of delivering. Given the huge problem of lack of saving for retirement, no one can be expected to sign up to the possibility of a delivery date beyond 2012, especially as the Pensions Commission report recommended an earlier delivery date. More importantly, no one should be expected to sign up to a project whose detailed implementation is shrouded in mystery. No one should give the Government a blank cheque on this, and we certainly have not done so.
	We fear that personal accounts will be delivered late. The latest weasel words are that they will be launched in 2012, but there has been no description of the functional capability of the scheme at that date. There has certainly been no confirmation of a start date of 1 April 2012, and anybody who has ever run a payroll department will tell you that implementing payroll changes on dates other than 1 April is a potential nightmare.
	Importantly, we do not know the total cost of delivering personal accounts and how those costs will compare with the 0.3 per cent annual charge that the Pension Commission put forward in its final report. The Government subsequently said that they thought that the initial cost might be 0.5 per cent to take account of various factors, but all of the noise in the system suggests an even higher cost, and the Government have been developing a case for public subsidy for their invention of a public service obligation.
	In Committee, we tabled an amendment to wind up PADA, not in 2012 but by the end of 2013, because we recognise that PADA would overlap with the start of personal accounts. We reckon that that should disappear fairly shortly after personal accounts have been set up. The Government did not accept 2013 and would not even accept my offer of an extra two years to 2015. We fear another runaway computer project. The public sector is littered with IT projects that failed to deliver either functionality or within cost budgets, or both. I will name just a few to remind the Committee—the Child Support Agency, tax credits, NHS IT. We all have our own personal examples.
	We have no idea about the nature of the solution that is being adopted for personal accounts and we do not know how the risks to implementation are being identified or how they will be managed. Mr Frank Field, who has devoted considerable time in this area and who has become a personal account sceptic, warned recently in Pensions Week:
	"There is ... the likelihood that the Personal Accounts Delivery Authority will implode. The new body will depend on a specially commissioned IT scheme. When did the government last commission a successful IT operation?".
	In short, we know almost nothing about personal accounts, but are fearful about what we do not know. Parliament is expected to take delivery of personal accounts on time and at a reasonable cost as a matter of faith because the Government say so.
	Against that background, we crafted Amendment No. 68 to ensure that Parliament is kept informed of the progress of personal accounts. It requires a report six months after the passing of this Bill and annually after that until the Secretary of State says that the scheme is fully operational. Subsection (2) sets out that the report should contain estimates of the amount spent and to be spent over the following 10 years. It must also state the date on which the scheme will be fully operational. Those are the basic building blocks; cost and timetable. The subsection also asks for the amounts that will not be recovered from members and which could well be subsidised, and for the charges to be made to members so that we can calibrate them against the Pensions Commission's 0.3 per cent.
	Most of the rest of the amendment is taken up with definitions of the terms that we have used, but I draw the Committee's attention to subsection (8), which is an exemption in order not to prejudice obtaining value for money. I am not convinced that it is appropriate, since it allows the Government an easy excuse for non-transparency, but when the Government conceded a similar clause in the Identity Cards Act 2006, that exclusion was built in. I would be happy to trust the NAO to act as policeman to ensure that the exemption is not abused. As I mentioned, there is a precedent for this clause in Section 37 of the Identity Cards Act. There we faced similar frustrations in not getting any detailed information during the passage of the Bill and we now get six-monthly reports on that scheme. My amendment modestly asks for only annual reports.
	I would have preferred the Government to have adopted an open and transparent approach throughout the development of personal accounts. All that has been on offer has been some personal briefings from PADA and DWP personnel, and those are not a substitute for transparency in general—not only for parliamentarians but for those outside who have a legitimate interest in the progress of the scheme. I beg to move.

Lord Oakeshott of Seagrove Bay: My Lords, we on these Benches certainly have some sympathy with this amendment. The noble Baroness is right to make our flesh creep at the prospect of another major computer project, given the Government's—"erratic" is a kind way of putting it—experience so far.
	I obviously look forward with interest to hearing what the Minister has to say in response. Our main concern, given the obvious risks involved, is how much a report six months after the day and then annually thereafter will actually help us. There is a danger of there being too much pulling up of the plant to see how it is growing. Having said that, we share many of the noble Baroness's concerns.

Lord McKenzie of Luton: My Lords, we return to the financial operation of PADA and the trustee corporation. As the noble Baroness has made clear, Amendment No. 68 seeks to put an absolute duty on the Secretary of State to produce a report six months after this Act has been passed, setting out amounts incurred and estimates on a range of financial and operational issues. The report must be prepared annually thereafter.
	I recognise that Parliament has a legitimate interest in the financial affairs of both PADA and the trustee corporation, and that interest extends to getting information on a timely basis. It reasonably extends to the decisions that will have to be taken on such issues as the charge structure and charge level.
	As the noble Baroness will be aware, some of the items that are listed in the amendment will already be included in the annual report and accounts of both PADA and the trustee corporation. These reports will be available to Parliament and will present the full picture of costs, revenues and how members' contributions are invested. The information included in these annual reports will be consistent with guidance from the Treasury in respect of NDPBs. I accept, however, that some of the information listed in the amendment will not be contained in the annual reports or the accounts, although some might be included, but at a high level, in business plans and corporate plans of PADA and the trustee corporation.
	However, in aggregate—including information included in the DWP supply estimates—this does not cover all of the detailed forward-looking information that the amendment would require. Some of that information we do not know, while other information has been treated as commercially confidential at this stage. I do not apologise for that. We may disagree as to whether it is the right judgment, but the clear advice to us is that it could seriously prejudice the procurement exercise. PADA will shortly begin negotiating with potential suppliers for the administration contracts needed for the scheme. Publishing even forecasts of costs over the next 10-year period, as the amendment would require, could undermine the negotiation process. We must ensure that PADA can obtain the best deal for members and, if there is Government funding, the taxpayer. Releasing figures prematurely could damage PADA's negotiating position, and could prejudice PADA's ability to obtain the best deal.
	I recognise that the noble Baroness's amendment seeks to deal with the issue of commercial sensitivity in subsection (8) of the proposed new clause, but this is not simply an issue of value for public money. Members' charges will ultimately pay for the personal accounts scheme, and members' pension incomes will suffer if we do not respect commercial confidentiality.
	However, there will be points in the future when decisions have been made, detail has been developed and the procurement process is sufficiently advanced. At these points, information that does not, or no longer, impacts on the commercial negotiations should be revealed. So I today make the commitment that the Government will, on a timely basis, make statements concerning the issues raised by the amendment. This information will supplement and explain that contained in the future annual reports and accounts of both PADA and the trustee corporation. We will seek to make available any information or analysis that we are able to at the same time as those accounts and reports are produced, although this would not preclude statements at an earlier time.
	Unlike the amendment put forward by the noble Baroness, these statements will complement rather than duplicate information provided through the normal reporting framework for an NDPB and a pension scheme. It should therefore provide an appropriate balance between ensuring financial and operational transparency in a way that protects taxpayers' and members' interests without adding significant burdens to the Personal Accounts Delivery Authority and the trustee corporation.
	I urge noble Lords to bear in mind that as the procurement process is due to start early next year and be completed by summer 2010, a report at six months after Royal Assent would not take us much further given the necessity of commercial confidentiality. Similarly, reporting at rigid annual dates thereafter might preclude producing information about a decision or event in as timely a manner as the noble Baroness is seeking.
	In Committee we debated fears about whether personal accounts will be delivered on time. We have no information or reason to assume that the Government's position as set out then has changed. Frank Field has been prayed in aid in respect of suggestions that personal accounts will implode. I should like to know the basis on which that judgment is made, which is a million miles away from our understanding. Charging levels for personal accounts are important but, as we debated previously, until procurement is undertaken and the funding structure for personal accounts is concluded, we cannot be absolutely clear about the charging structure or the end result. However, on the work that has been done, we believe that personal accounts can be delivered on the basis suggested by the Pensions Commission with low charges and that they will be self-funding in the long term. We have talked about subsidy. Perhaps it would be better to describe what the Government have in mind—if we go down this route at all—as compensation for the public service obligation being imposed on personal accounts. If the Government deemed that necessary and appropriate, it could become a reality only if we complied with European state aid rules. Compensation could be delivered to personal accounts only in those narrow circumstances. Beyond that, we are clear that it must be self-funding, and believe that it can be in the longer term.
	I acknowledge the noble Baroness's legitimate interest—and that of the whole House—in this issue and her reasonable desire to allow parliamentary scrutiny of the scheme's funding requirements as a way of ensuring the taxpayer is protected. Following a debate on the first Report day, I propose to look again at the financial provisions within Clause 80 and Schedule 1 to ensure they clearly reflect the Government's intention that the scheme is delivered at no overall cost to the taxpayer. I hope that I have said enough to persuade the noble Baroness not to press her amendment. I reiterate that I desire to help her achieve her objectives within the framework of commercial confidentiality and protecting the interests not only of the taxpayer but of future personal account members.

Baroness Noakes: My Lords, I am intrigued by what the noble Lord said about the possible inclusion of additional material in the documents produced by PADA, the trustee corporation and possibly even the department. Are the Government prepared to put that in the Bill at Third Reading?

Lord McKenzie of Luton: My Lords, we do not think that necessary. I am sorry that I cannot give a firm commitment on the record. If the noble Baroness thinks there are ways in which we can strengthen that commitment and put it on the record, I shall be happy to consider them. We have to accept that we are all dealing in good faith on this, but we need flexibility if we are to achieve what she seeks. To put something very rigid in place may not fit that purpose. There will be plenty of information in the accounts, but we recognise that that will be historic information that will be looked at in retrospect. We are trying to help the noble Baroness with a forward look at the information that she seeks, in a way that is consistent with commercial confidentiality. I hope that by putting it on the record today, the noble Baroness, her colleagues and the rest of the House will be prepared to accept that assurance.
	I can give chapter and verse, if necessary, on the ability of the Secretary of State to cause that to happen and to cause those data to flow from PADA or the trustee corporation, which is enshrined in various bits of the legislation. We jousted a little on that on the previous day on Report.

Baroness Noakes: My Lords, I am disappointed with the Minister's overall stance. While seeming to open up to more transparency, he is in fact inviting us merely to have extra information in the annual report, which by definition is quite late. It is certainly out of date in terms of costs. I do not think that we have PADA's annual report for last year yet, so we cannot rely on information coming promptly from these organisations.

Lord McKenzie of Luton: My Lords, PADA's annual report and accounts were filed late last week. I accept that it is only a short period and it does not tell you very much. If we had a flexible approach, we would not have to wait for specific events or timelines in terms of the production of accounts and reports, or for the annual reporting event that the noble Baroness suggested. We could seek to make statements at appropriate intervals when the relevant information became available.

Lord Oakeshott of Seagrove Bay: My Lords, what did the Minister mean when he talked about giving further reports or information in a timely fashion, which I think is what he said?

Lord McKenzie of Luton: My Lords, it is self-evident. It was in part to deal with the point made by the noble Baroness; that accounts for the period up to 31 March do not arrive on 1 April each year. We know that there can be a delay, and sometimes that delay is longer than we would hope. By recognising that the information requested should not wait for specific trigger points that could be at some time in the future, I was trying to see whether we could help her along the way. I cannot define it any more closely than that. That was the purpose of using the expression.

Baroness Noakes: My Lords, the Minister continues to disappoint me. The issue is very clear. We have considerable concerns about this project, particularly about when it will be delivered and the cost. We do not accept that personal accounts are acceptable at any cost, and considerable doubts have been raised about what those costs might be.
	The amendment was seeking to get into the public domain information equivalent to that produced in the context of commercial confidentiality concerns for identity cards. The Government are not seeking to be as transparent and open as they should be. Nevertheless, I do not think that it is appropriate to divide the House on this amendment. We have heard what the Minister has said. If the Minister and his Government do not deliver on that promise, we will all be clear where the blame will lie if and when the project does what many fear it will do—in the words of Mr Frank Field, to implode. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 69:
	After Clause 98, insert the following new Clause—
	"Conditional indexed arrangements
	(1) Schedule (Provision for conditionally indexed arrangements etc), which—
	(a) amends section 84 of and Schedule 3 to the Pension Schemes Act 1993 (c. 48) (basis of revaluation),(b) amends section 51 of the Pensions Act 1995 (c. 26) (annual increase in rate of pension), (c) amends section 67 of the Pensions Act 1995 (restriction on powers to alter schemes),(d) amends Schedule 7 to the Pensions Act 2004 (c. 35) (pension compensation provisions), and(e) makes provision for consequential amendments for the operation of conditional indexation in relation to a scheme that satisfies prescribed conditions,
	has effect.
	(2) The amendments made by Schedule (Provisionally for conditionally indexed arrangements etc) do not apply in relation to any scheme or arrangement in existence prior to the coming into force of this section.
	(3) In this section, "conditional indexation" relates to benefits provided by a conditionally indexed scheme.
	(4) For the purposes of this section and any regulations made under it, a "conditionally indexed scheme" is an occupational pension scheme within the meaning of section 1 of the Pension Schemes Act 1993 which—
	(a) was established after the coming into force of this section,(b) is not a money purchase scheme as defined by section 181(1) of the Pension Schemes Act 1993,(c) provides that the future indexation of pensions both in deferment and in payment (at least the minimum rate required under section 84 of and Schedule 3 to the Pension Schemes Act 1993 or section 51 of the Pensions Act 1995, as relevant, as if those sections applied to conditionally indexed schemes) is funded for in accordance with Part 3 of the Pensions Act 2004, but is not a liability of that scheme such as to create an accrued right or entitlement for or in respect of a member unless and until it is awarded by the trustees or managers in accordance with such terms and conditions as may be prescribed,(d) complies with methods and assumptions prescribed for the setting of normal pension age, and(e) complies with such other requirements as may be prescribed."

Baroness Noakes: My Lords, in moving the amendment, I shall speak also to Amendment No. 70. These amendments insert a new clause after Clause 98 and a new schedule after Schedule 2. They would allow conditionally indexed pension arrangements to be introduced into the UK. I will not weary the House with an extensive explanation of conditional indexation, because we covered that in some detail in Committee. These amendments are identical to those that I moved in Committee and I understand from the Minister's officials that, if not perfect, they are fit for purpose. I shall go straight to the issue.
	Defined benefit provision in the private sector is in terminal decline. The Association of Consulting Actuaries estimates that only some 900,000 private sector employees remain in schemes that are open to new members. A recent survey by Aon shows that one-third of private sector schemes which were opened to new members a year ago have now closed. The Association of Consulting Actuaries' survey of SMEs shows a situation that is even worse—91 per cent have closed to new entrants and 48 per cent have closed to future benefit accrual.
	Recent stock market falls will bring pension deficits to the fore again and, unless something is done, boardrooms will increasingly take decisions which will place more and more pension accrual on a defined contribution basis. The director-general of the CBI has said that we need to "set employers free" to design schemes which are open about the level of benefits to be provided to members, but which do not necessarily have to provide everything.
	The Government's rather belated consultation on flexibility ended nearly two months ago and we have heard nothing about that review. We have a Pensions Bill before us and we may not have another for some time. It seems that the Government will let this opportunity pass and, therefore, we have to doubt the degree of commitment within the Government to finding flexible ways in which the complete eradication of defined benefit provision in the private sector can be avoided.
	The Association of Consulting Actuaries has developed one form of flexibility, conditional indexation, which is contained in the amendments. This gives only a modest degree of flexibility to employers who cannot afford to meet the onerous indexation provisions set out in our pensions legislation. I remind the House that we are the only country which insists on the indexation of pensions before and after retirement. Conditional indexation does not abolish that, but merely allows it to be modified in certain circumstances prescribed in regulations. The funding of the scheme would continue to be overseen by the regulator, who we know has a vast armoury of powers to deploy to keep schemes well funded.
	We do not believe that these amendments would stand in the way of the Government bringing forward further flexibility arrangements. Indeed, we hope that the Government will genuinely set employers free to design pension arrangements which they are comfortable operating. Flexibility is the only route to avoiding the whole private sector population being forced to migrate to defined benefit provision. That will, of course, leave the public sector with its gold-plated pensions, but the noble Lord, Lord Kirkwood, will speak to that issue when he moves his Amendment No. 74.
	The Minister claimed in Committee that the Netherlands scheme, on which these amendments are based, is not well understood by members. It is more difficult to communicate the details of conditional indexation than plain-manila defined benefit provision, but I do not see why employers on that ground alone should be denied the opportunity to develop conditional indexation schemes. The plain fact is that employees do not have a high understanding of pension issues generally, and let no one pretend that DC pension arrangements, which are the prevailing private sector provision, are easy for employees to grasp.
	The only other ground that the Minister offered in resisting these amendments was that we should await the outcome of the Government's own deliberations on flexibility. The review is clearly in the long grass and I have heard nothing to suggest that the Government share the employers' views that flexibility is urgently needed. We should grasp any possibility that may preserve defined benefit provision, albeit in a modified form. A small bit of flexibility today is worth many times more than the vague possibility of flexibility tomorrow. I beg to move.

Baroness Turner of Camden: My Lords, I have had some doubts about the conditional indexation model in relation to final salary schemes. As noble Lords will remember from previous debates, I have always been very much in favour of final salary schemes, and it is a matter for regret that a number of them have been disappearing. In my opinion, the problem with the conditional indexation model is that it could simply precipitate the flight from existing schemes to conditionally indexed schemes, even when employers have no difficulty in funding their current schemes.
	There is a fine balance to be struck between encouraging employers to retain DB provision where they would otherwise switch to defined contribution schemes and not incentivising employers to switch to risk sharing where they would otherwise retain their final salary scheme. I understand that the Government are committed to considering regulatory change, as necessary, and I should be happy for that to proceed. However, I am not at all convinced that the effect of adopting the scheme recommended in the amendment would be the retention of final salary schemes where employers were not under any pressure, either financially or in any other way, to switch to DC schemes.

Lord Oakeshott of Seagrove Bay: My Lords, the noble Baroness, Lady Turner, is probably living in a bit of a dream world if she believes that there are now many private sector schemes which are not under pressure, particularly given what has been happening to stock markets in recent weeks. Hundreds of billions of pounds have been wiped off the assets of pension funds in general, and even some of the strongest and best funded private sector pension schemes are clearly now in a much more difficult position.
	I pay tribute to the work of the Association of Consulting Actuaries, which has had meetings with us and other noble Lords, and has done a great deal of work on these amendments. I think it is right to raise this issue and the fact that we need a middle way between conventional DB schemes, which are now under so much pressure, and defined contribution schemes.
	However, I am not sure that I agree with the noble Baroness's argument that, even if we are not certain that this is the right approach, we should table some amendments now and the Government can come back on them later. It seems to me that it is probably a little soon to set these out, and other serious organisations with a great deal of experience in pensions—I think particularly of the EEF—are sceptical about this way of doing things. I shall listen with great interest to what the Minister says but it is important that this matter is not kicked into the long grass. It is important that we explore the issue seriously and that the Government bring forward their proposals on conditional indexation soon. If the amendment is not accepted—and I believe that the Government do not want to accept it—I want to know what are they going to do and when.

Lord McKenzie of Luton: My Lords, I thank the noble Baroness for tabling this amendment because it gives me a chance to update noble Lords on developments since we last debated this issue in Committee. Like the noble Baroness and other noble Lords who have spoken in this short debate, the Government are concerned about the trend of DB scheme closures. Back in July, when we debated these same amendments, we had just published a consultation paper, as has been acknowledged, on risk sharing. The paper was very wide-ranging and sought views on a number of proposals. It included material on risk sharing within the current regulatory framework, including what changes employers are making to their schemes, to illustrate what is currently possible. It also outlined some proposals for risk sharing put forward by stakeholders, which included conditional indexation restricted to new career average schemes or extended to all salary-related schemes, and collective defined contribution schemes.
	We received more than 80 responses, which reflected a diverse range of views with no clear consensus. For example, a number of respondents to the consultation on risk sharing felt that the idea of collective defined contribution schemes was appealing in principle. In collective defined contribution schemes, employers would have certainty about their contributions and the financial risks would be shared between the members rather than between the members and the employer, but respondents also said that further work would need to be carried out before it could be implemented. Other respondents asked us to look at the legislative provisions that apply to cash balance schemes, which are structured like defined contribution schemes but where a member's pension pot is not exclusively reliant on contributions' investment returns. These schemes are treated by DWP legislation as defined benefit schemes because of the guarantee about the size of the pot provided by the employer. We are looking further at those issues.
	While there was some support for conditional indexation arrangements and also for collective defined contribution schemes, a number of respondents expressed concern that the approaches set out in the consultation paper were too complex. Some wanted more radical and simpler solutions, and others asked whether the proposals were fair, in particular in the way that pensioners were treated. Some argued about specific further changes and felt that the current framework provides enough flexibility and that the opportunities for risk sharing that currently exist should be more widely publicised.
	The question of demand for risk-sharing also arose in the consultation responses. Some of the views expressed chimed with the results from the recent research on employers' attitudes to risk sharing that was carried out on behalf of DWP and published in August. The findings of this survey indicated that among employers in the study who provided pension schemes for their employees there was relatively little interest in risk-sharing approaches.
	While the consultation responses have not presented us with a clear mandate for a particular approach to the issues around risk sharing, we are continuing to work urgently to identify the appropriate way forward. The Government are committed to doing all we can to support good employer pension provision, but we must find a solution that strikes the right balance between employers and scheme members. We should keep in mind that these issues are about redistributing risks away from employers to scheme members, not about eliminating or reducing risk. It is that balance that underpins our considerations. While we are looking at the conditional indexation option, we are mindful that some consultation respondents found it too complex.
	It is crucial to take into account how well arrangements can be understood by members of schemes. If complex messages about inflation protection were to undermine confidence in pensions at a time of such economic turbulence, that would be a high price to pay. We must also bear in mind that if conditional indexation is introduced in the same form as in the Netherlands, there would be a number of resulting issues. For example, whether it should be accompanied, as there, by a buffer requiring schemes to be funded to around 130 per cent of their nominal liabilities and whether there should be 50 per cent member-nominated trustees.
	I understand the argument that something has to be done quickly to slow the decline in defined benefit provision, particularly in the current economic climate. However, we should not consider adopting this amendment simply to be seen to be doing something if the outcome would be to create a system that is so complex that it would do nothing to help stop the decline. It has been said that it is worth introducing these amendments if they stop even one employer closing its DB scheme, but it is just not that simple. I understand that the ACA model would apply to new schemes only. If that is the case, there is a risk that that would create churn in pensions market. Consideration needs to be given to the various options and their implications before we make any decisions on a way forward, including about what changes, if any, are needed. That would include consideration of the implications for the pensions regulator. The noble Baroness may be disappointed by my reply, but we are not prepared to rush into making changes to legislation without being clear that that is the right thing to do.
	In response to the point raised by my noble friend Lady Turner, I reiterate that the ACA model before us is predicated on a career average scheme and would involve closing schemes and opening new schemes. She made an important point about considering not only the opportunities that might arise for some schemes but whether this would drive behaviours and encourage people away from their current provision.
	Like us, the noble Lord, Lord Oakeshott, recognises the need to do something and to make progress but expresses scepticism about whether this model is the right one to adopt at the moment. If we were to conclude that we should introduce legislation along these lines, we could not, as the noble Baroness will appreciate, recommend adopting the amendments as they stand. We have real concerns that they are technically deficient—although I accept that the Government have the resources to address such technical issues—and would not deliver the kind of conditional indexation that the Opposition and the Association of Consulting Actuaries, which developed the idea, are proposing.
	First, the amendments provide for indexation to be funded for as a liability of the scheme but specifically state that indexation is not a liability of the scheme, so as to create an accrued right or entitlement. It is therefore unclear whether a scheme would in fact be required to be funded so as to provide for indexation where indexation had not already been awarded. If no rights to indexation are to accrue to the member until awarded and therefore the scheme is not required to fund for them, this would in effect remove the requirement for indexation and make it discretionary. As I understand the ACA proposal, that is not the intention. In addition, the amendments could result in discrimination between early leavers and those who remain in the scheme until normal pension age, where the scheme is a final salary scheme. This is likely to be contrary to the requirements of EU legislation.
	I acknowledge that these are extremely difficult issues with difficult judgments to be made, but I assure the noble Baroness that we have not closed the door on this option. I reiterate that we are working urgently on this issue and I do not preclude our returning to it at Third Reading. However, that is as far as I can go at the moment.

Baroness Noakes: My Lords, I thank the noble Lord, Lord Oakeshott, and the noble Baroness, Lady Turner, for their contributions to the debate. The noble Baroness appears to think that there are employers who will be happy to continue with defined benefit schemes. We always thought that the banks would carry on with their rather generous schemes, but I would surprised if boardrooms will be so comfortable going forward, given the ravages to their finances over recent weeks.
	The trend in the private sector is clear. Defined benefit will disappear and it is just a question of time, unless something can be done to make the liabilities more manageable for employers. Those liabilities are large, unpredictable and difficult for companies to absorb. That is just a fact; I cannot tell the noble Baroness this in more straightforward terms. It is what the employer and business community believes strongly, which is why the director-general of the CBI made a plea for companies to be set free to design something that they would be comfortable in persuading their workforce was an appropriate set of benefits.
	The Minister said that the Government are looking at their consultation on flexibility. Inevitably there are different views, because some people are clinging to the belief that defined benefit will be kept in place by doing nothing. That is simply not the case. This is a serious issue. It is a failing by the Government that they have not used this opportunity to do anything in the Bill to help defined benefit. The Bill drives further and further towards defined contribution; that is what it is all about. I deeply regret that the Government are taking that approach. However, I will not divide the House on the issue. The Government said that the amendments are technically deficient, but that is not the most important thing. I recognise that, if the Government set their face against flexibility, there will be none. The Government will be judged on their record on defined benefit schemes, as they should be. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Fowler: moved Amendment No. 69A:
	After Clause 98, insert the following new Clause—
	"Suspension of annuitisation order
	(1) The Secretary of State may by order suspend any statutory provision or rule of law requiring a pension to be taken in the form of an annuity.
	(2) The Secretary of State may by order renew an order made under subsection (1).
	(3) The period for which a suspension order, made under subsection (1) or (2), has effect must be stated in the order and may not be less than 6 months or more than 2 years.
	(4) Any order made under subsection (1) or (2) does not have effect until a draft has been laid before, and approved by a resolution of each House of Parliament."

Lord Fowler: My Lords, the new clause is designed to meet a particular and urgent need. As the House knows, the present rules on annuities require people who have personal, defined contribution pensions to buy an annuity at age 75. The difficulty is that people are being required to do this in the midst of disastrously falling markets, with the effect that their savings—their pot of money—have been radically reduced, and the annuity that they can buy has been reduced with that.
	The Minister knows my view that compulsory annuities should be abolished altogether. That was the view of your Lordships when we debated an amendment tabled by my noble friend Lord Hunt of Wirral last June. My noble friend now has Front-Bench duties, shadowing the noble Lord, Lord Mandelson, but I know that that remains his view.
	I emphasise that the proposed new clause is not an abolition clause; nor is it an attempt to increase to 80 or 85 the age at which an annuity can be taken—a later amendment deals with that, but that is not the proposition here. The purpose of this new clause is to give the Government the power to suspend the rule that an annuity must be taken at the age of 75. It is as straightforward as that in its intent. If there are imperfections in the drafting I apologise, and I am not over the moon about the description "annuitisation order". But I hope that the Minister will respond not on the technicalities but on the principle of bringing help to those men and women who need it now.
	At the heart of the proposal is the scale of the present financial crisis. We do not need to look very far to find evidence. The Chancellor of the Exchequer referred to it as the worst crisis for 60 years. The deputy governor of the Bank of England, Charlie Bean, was even more explicit. Last week, he said:
	"This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history".
	In terms of the impact on the real economy we are still in early days. I should add that this was reported first in the Scarborough Evening News, which shows that even today with the internet and 24-hour television, regional newspapers still manage to get their scoops. It was a remarkably frank and important statement.
	Stock markets around the world have crashed and the value of pension investments has radically reduced. The FTSE and Dow Jones have seen massive falls; the Nikkei is now down to its lowest position for a quarter of a century. The impact on savers trying to build up a pension has been little short of catastrophic. On average the value of defined contribution pensions has reduced by about a third. Everyone has been hit; but most of all those who are in their 70s. At this point, I should declare an interest. I am 70. I am not sure whether that causes surprise to noble Lords who thought I was much younger or much older.
	I am relatively fortunate as I have five years to make up the losses in my pension if, as we hope, the markets eventually recover. However, consider the position of a man or woman now aged 74 or 73. They have no time to make up their losses, but as the law stands they will be forced to take an annuity. The time axe will come down on them and they will be forced to buy an annuity with a radically reduced fund. Having bought it, it is likely to be a permanent diminution in their retirement income. That is why I want there to be the power to suspend the compulsory annuity rule. How long that rule remains suspended is a matter for the Government—or any Government who may succeed them.
	To be fair, the Government have shown in a number of comments from Ministers—not least those of the Leader of the House of Commons—that they are aware of the difficulties and the need for action. We now want those expressions of sympathy converted into action. The only half-argument that I have heard against such a change is that the rule affects only a small number of people. I do not regard that as an argument for inaction. Injustice is still injustice, however small the number affected.
	There are two additional points. First, we have already legislated to exclude the Christian Brethren, the Plymouth Brethren, who have a principled objection to the pooling of risk of mortality. I understand that that exclusion affects fewer than 1,000 people. Secondly, and more crucially, it is important for pensions policy generally that we—all parties—want to encourage as many people as possible to make provision through saving for their pensions. Presumably, that is common ground around the House. The sight of the compulsory annuity rule being enforced in the present financial crisis would damage all our efforts. It would be hardly surprising if people said, "What is the point of saving if at the end of the road we are forced to take the kind of loss that so many people are facing at the moment?"
	This is a question of justice for the men and women who have saved for their future but have been caught in a financial storm that they had no way of influencing and very little chance of avoiding. We have the opportunity of avoiding that injustice this afternoon. I hope that it is an opportunity that the Government will take. I beg to move.

Lord Skelmersdale: My Lords, my noble friend Lord Fowler is quite right to remind us that in last year's Pensions Bill we passed an amendment moved by my noble friend Lord Hunt of Wirral, which abolished the rule that people holding pensions must take an annuity by the time that they are 75. He and I were more than a little annoyed that in another place, the amendment was not even debated. It was deemed out of time because of the guillotine. My noble friend moved the amendment again in Committee earlier this year, although he withdrew it due to the Government's enduring obduracy.
	Time has shown just how percipient he was in moving it; but his amendment, although remaining the Opposition's long-term policy, needs to be adapted to the situation in which we now find ourselves. After the worst autumn for the economy that most of us can remember, the financial security of pensions has deteriorated significantly. I congratulate my former temporary boss and noble friend Lord Fowler on picking up on something that my right honourable friend Mr Hague said at Prime Minister's Questions on 15 October. Referring to the extraordinary economic times we are now in, he spoke with feeling about the pensioners who are forced to buy an annuity, perhaps on reaching retirement or, by law, at least by the age of 75. He made the point that they will be locked into a lower income for the rest of their lives.
	In the amendment, my noble friend proposes a temporary suspension of those arrangements. To be fair, Ministers have said previously that they will look at that. Indeed, the right honourable lady Ms Harman, in response to my right honourable friend Mr Hague, conceded that,
	"the impact on family finances, businesses and jobs has been sudden".
	She continued:
	"It is important to consider the question of the impact on people—albeit a small number of people—who have to buy their annuities within a certain period of time ... I know that the Department for Work and Pensions is talking to the Treasury about the issue".—[Official Report, Commons, 15/10/08; col. 787.]
	It is an old saying that talk is cheap. It is the results, if any, of that talk that matter, and, currently, as I am sure the Minister is about to tell us, the omens are not good. Notwithstanding the fact that we on these Benches have always believed that the Treasury was 100 per cent wrong to maintain the rule of compulsory annuitisation by the age of 75, we reluctantly accept the right of another place to put the boot in and say, "No way". At least, we did. However, as the right honourable lady said last Wednesday, the situation has indeed changed, and for the worse. She claimed that very few were affected, but the number is growing.
	If memory serves me right, the noble Baroness, Lady Hollis, told us in 1974 that we were worrying about only 1 per cent or so of pensioners. Last year, the noble Lord, Lord McKenzie, told us that it was 3 per cent of those in the group with pension pots of more than £100,000, although both figures now need to be updated. The last figure that I heard was 5 per cent, but the exact figure hardly matters when the Government admit that Amendments Nos. 78AP and 78AQ on the buy-back of state pensions, welcome though they are, will help only a maximum of 110,000 people. As my noble friend Lord Fowler has said, alternatively secured pensions were invented for fewer than 1,000 Plymouth Brethren. Not only that, the £100,000 figure on which annuity rates are quoted has become totally meaningless. In October last year, the FTSE 100 stood at a smidgeon under 6,500. On 1 October this year, it had fallen to 4,959.60. By 16 October, it had dropped through the floor, and closed at 3,861.40. Over the weekend, it dropped again, and significantly, stood at 3,765 at lunchtime today. The net result of all this, as my noble friend Lord Fowler has just pointed out, is that the FTSE is down by more than 30 per cent this year.
	It is not impossible to believe the NAPF when it says that pension pots, too, have shrunk by more than 30 per cent; nor that, according to Aon Consulting, assets of direct contribution schemes have plummeted from £552 billion to £395 billion, despite the £6.7 billion of contributions paid in by employers and employees during the year. These figures are already out of date because they are last week's figures. Doubtless the situation is even worse today, as we are told that the FTSE dropped another 5 per cent at the end of last week. In other words, the £100,000 on which annuity rates are quoted has become less than £70,000.
	What a time to take your annuity. It is no good the Minister saying, as I expect he will, "You should have taken it earlier". Hindsight is a wonderful thing, but in this case it goes against the grain of human nature, particularly in uncertain times when people will delay taking out their annuities for as long as possible in the hope that the Stock Exchange will rise. That is precisely why the Government need in their back pocket the statutory instrument that my noble friend proposes. It is not, as he said, a blanket abolition of compulsory annuities; it would enable the Government to be flexible at a time of their choice but at a time of severe volatility on the stock market, which is precisely what we are seeing now.

Lord Sanderson of Bowden: My Lords, my noble friend Lord Fowler has tabled an amendment at a critical moment, particularly for pensioners. Fate has done me a good turn. I was 75 on 30 April this year. I took my annuity at the time, and I am very relieved that I did. The present situation is undoubtedly extremely hard on those who are six months younger than me. They have saved all their lives, and have had a self-invested pension plan. They have taken risks because we have to do so if we want to improve our lot. That is what everyone wishes to do. But to have at this point a shotgun marriage of a pensioner of 75 with his annuity is criminal. I hope that the Government understand that the present situation is unusual, very bad for anyone with money in the stock exchange, and particularly so for anyone who has to take an annuity by law when they are 75.

Lord Forsyth of Drumlean: My Lords, I am nowhere near 75 so I do not need to declare an interest, but I am extremely concerned about this. If we look at the root cause of the financial catastrophe unfolding around the world, it is clear that it is about people borrowing too much and not saving enough. Surely we should be doing everything we can to encourage people to save for the future. I strongly support my noble friend's amendment, although characteristically he has been more moderate than I would have been. I do not think we should have this rule at all, and I believe that my noble friend is of the same view. But in the interests of pensioners who are going to suffer real hardship, it is a sensible and moderate compromise.
	I do not envy the Minister if he does not accept the amendment today because it will seem rather inexplicable when the Government can find huge sums to bail out the Royal Bank of Scotland and the Bank of Scotland. I mention those two banks in particular as their shares are typical of the kind held by elderly people. They believed that they were safe as houses and they considered the size of the dividend. The shares are part of their pension schemes, and now partly because of the Government's insistence that no dividends are available, the funds are devastated. So even if the Minister is not able to accept the amendment now, I hope that the Government realise that there is real hardship and that the people who are suffering are those who have done the right thing—they are the people who have put money by.
	If, we are to recover in the long term, to coin a phrase from Keynes who seems to be very fashionable on the Benches opposite these days, we will do so because people and Governments put money aside for a rainy day. People should be encouraged to save. The tragedy for those who have done that, particularly with this Government—we saw it in the changes to the tax rules for dividend income and in the Government's toing and froing on what people could and could not invest in their SIPPs—is that they are beginning to think, "I am not sure I will be safe by putting my money into a pension scheme because the Government can act in an arbitrary way and change or alter the rules at any time". Surely we should be liberalising the rules as far as we can, consistent with not putting a burden on the welfare state. Again, I support my noble friend's amendment, and if the Government are serious in their rhetoric that they will help people through this crisis, and if that has any value at all, surely the oldest and most vulnerable in our society who have done the right thing should benefit first from that rhetoric.

Baroness Hollis of Heigham: My Lords, I shall not vote on this amendment if the noble Lord, Lord Fowler, proposes to put it to a Division, but it is a sensible proposal, and I should like to say why. I have supported it on previous occasions.
	Perhaps I may start where I suspect my noble friend will be coming from—this has been alluded to by other speakers. The argument is that it will affect only a tiny percentage of people; the 3 to 5 per cent of the well-to-do who, if they can postpone taking an annuity until they are 75, must have other resources on which they can live and therefore this is relatively marginal to their financial well-being. In any case, it is argued, their savings pot has been protected and wrapped around with generous financial subsidy because it is meant to be exclusively a retirement income and not available for other purposes. While I hope that I am wrong, the argument I suspect my noble friend will adduce is that, first, it is a matter only for the well-to-do who are cushioned by other resources; and, secondly, that it goes against public policy for which the tax privileges of pensions were designed. Let us take a moment to unpick those two arguments because I do not think they are valid, and have not been so for some time.
	The first government argument is that it affects only a tiny percentage of people. It may well be true that the people now coming up to their 75th birthday who have resources sufficient that they have been able to avoid annuitising so far are the well-to-do. However, that is because that generation has moved out of a DB world in which very often the pot has been accumulated through a change of life savings or in some other way. Now the predominant form of pensions in the private sector will be the DC scheme. I made a rough, 10 year-old-type maths calculation that someone on average earnings over 40 years, with real growth of 3 per cent, if that is not unrealistic, is now likely to build up a DC pot of around £300,000 to £400,000. That means that over the next 10, 15, 20, 30, 40 years what will matter to people is not what the current rule is for someone now approaching 75, but what they see themselves, in an almost aspirational way, as reaching.
	Why would someone seek to increase their contribution to a DC scheme if in addition to the investment risk in, the disinvestment risk out and the longevity risk they are taking also have the additional risk imposed on them by government of the timetable, the guillotine? As the noble Lord, Lord Fowler, said, any wise Government wishing to encourage savings would seek to abate, as far as they can, some of the risk associated with a DC scheme, one of which is the arbitrariness of the 75 rule. It is a form of risk unlike conditional indexation and some of the other matters we have discussed. In a DC scheme, you do not have the protection of the PPF—although you do have the protection of the TPR—and there are many areas in which people are exposed, but this is an additional area of risk that is man-made, government made, and could be done away with.
	The Government's second argument is that this is heavily protected by fiscal privileges; it is designed for retirement and therefore it should not be available as a lifetime income but should be turned into an annuity. That is all very well, but let us suppose that at the point you suspend it you extend that suspension and insist that at 75 you take an annuity from that pot of, if you are in a DC scheme, £300,000 or £400,000 which is sufficient to cover your need to draw down on benefits, and that that would take perhaps £120,000 at 75 or £150,000 earlier. Let us also suppose that you make a fiscal adjustment to remove the tax privileges, which might be 30, 35, 40 per cent, leaving you out of your pot of £300,000 to £400,000 with perhaps £100,000 clear. If that were the case, what on earth would it have to do with the Government what you did with the rest of the pot, provided you had paid back your dues? If you do not fall back on benefits and you have an annuity to protect you against that, and if you have had the fiscal addition removed from you, then the rest of your money is, frankly, nothing to do with government.
	On the contrary, the Treasury would make a profit. Not only would the fiscal protection be returned back to the Treasury but those moneys as income would generate income tax and possibly eventually IHT returns. There would be an impact on cash flow but the Treasury would not be out of pocket. What would happen is that the additional revenues would be going back not to other members in the pot but to taxpayers as a whole.
	For those reasons, the case that the Government have run in the past—that it affects only the well-to-do who are not at risk and that these were privileged savings which should be taken only in the form of an annuity—should no longer apply. Like the noble Lord, Lord Fowler, I would like to see this rule removed subject to those two conditions: an annuity so that you never have future recourse on to public funds and the removal of the tax privileges. In the present tsunami, it is even more vital.
	What are we saying to pensioners? Here we are, seeking to increase the basic state pension from 2012 by linking it to earnings and, with the help of your Lordships, seeking to help women improve their basic state pension. We are, however, saying as a Government, "Fine, but if you have a pension that you're going to annuitise, we are willing to see it fall by between 30 per cent and 40 per cent from what it would have got six months or a year ago". Why? We do not need to do that. We can put in the protections to make sure that this is not an unreasonable and advantageous thing for the well-to-do. Why add to the risk and penalise people at a difficult time in their life when the Treasury has nothing to lose by protecting them and everything to gain? It would be a win-win for all of us.

Lord Crickhowell: My Lords, I agree with every word that the noble Baroness has just said. I declare a rather unpleasant interest, in the sense that I fit two of the categories that have been described here. I am shortly to be 75 and I had an excessive investment in the Royal Bank of Scotland and other banks, because my stockbroker thought that they were a good dividend yield that would produce the sort of income that was needed in a pension scheme. All pension schemes are now going to be wrecked by the Government's decision that dividends from banks should not be paid for a long time to come.
	I rise, though, for another reason. I suspect it is possible that the Minister may introduce a topic that has already been referred to today, and which, if a quotation in one of last week's papers is correct, led the Chancellor of the Exchequer to say, "Oh, there's no need to do this because there is already an escape route. An alternative is already in place". It is the escape route that my noble friend referred to as having been designed for the Plymouth Brethren. He said it applied to only a tiny handful of people. In fact, that rule is never restricted to the Plymouth Brethren; a large number of people took it up because they saw a way of avoiding estate duty. The Government intervened, perfectly reasonably, to stop that escape route, but the proposition that you can take out an alternative secured pension remains. Indeed, I have one.
	For some time, I have had what is known as a drawdown arrangement in my personal pension scheme—managed by my broker, not tucked away in an insurance company or in any other way—and therefore do not have to buy an annuity. I do not begin to understand why, if the Government are prepared to allow that escape route, they are going to be so rigid about giving a rather wider escape route to all those who have not followed that route and for whom it might be quite difficult to enter into an alternative secured pension and a drawdown arrangement in the final months before the annuity rule applies to them.
	If it is right and proper that a considerable number of pensioners can manage their affairs in this way, and quite a lot of them do, I see no possible reason why the Government should object to my noble friend's other proposition that there should be a temporary escape mechanism—that is all he is suggesting—during this horrendous moment when the markets have been plunging through the floor. Like a number who have spoken, I think the whole rule should be dropped altogether, but let us be content for the moment with the amendment and rescue those people who do not have the escape route that I have provided for myself. I hope, and it is just possible, that some of my investments may recover in time for me to get rather a better pension than it looks as if I might at the moment, but at least I will not be forced in the next five months to buy an annuity at almost the worst possible moment.
	If the Chancellor is saying, "It's all right, I don't have to do anything; there's an existing escape route", he should warmly embrace my noble friend's proposition and offer an escape route for all those facing the kind of desperate situation that I would have been in if I had not already taken the drawdown and alternative secured pension route. I am not a member of the Plymouth Brethren, and there was no actual restriction applying it to them. There were statements that that was why it had been introduced, but a large number of people who do not belong to the Brethren have alternative secured pensions. It is a legitimate thing to do, and the Chancellor and the Government are now apparently saying so. Let us have no more nonsense; let us accept my noble friend's amendment and give hope to a lot of people who are otherwise in a pretty desperate state at present.

Lord Howarth of Newport: My Lords, I, too, hope that my noble friend the Minister and the Government will find themselves able to look sympathetically and constructively at the amendment tabled by the noble Lord, Lord Fowler. I should like to reiterate a couple of points that have been made.
	We have seen in recent years a substantial move towards people saving for their pensions by way of defined contribution schemes. The Government have smiled upon this; they have certainly not discouraged it, and all the signs are that that trend will continue. Although many people in defined contribution schemes must certainly be deeply worried about the future of their pension savings, there is, I think, no likelihood—and the present nightmare events in the stock market only reinforce this—that we shall see a return to defined benefit schemes as the norm, so people will have no choice. But as things are, and given that no one has been able to devise a way to smooth the exit into an annuity for people saving in money purchase defined contribution schemes, they face a kind of Russian roulette, and it is the responsibility of the Government to do what they can to help those people secure themselves in circumstances which could be absolutely catastrophic.
	The other point to reiterate is that the Government want people to save more. They want people to work for longer and to be more flexible about the moment of their retirement. You must have a pensions regime that supports them in that approach and in taking those decisions. The noble Lord, Lord Sanderson, said that the present circumstances in the market are very unusual, and indeed they are extreme. However, market fluctuations are entirely normal and, that being the case, it must be wrong to require people rigidly to annuitise and take their pension at a fixed age, certainly in the circumstances we are considering. It could be cruel and even ruinous to require people in defined contribution schemes to take their annuity according to the letter of the present law. So I very much hope that my noble friend will be able to tell the House that the Government are indeed looking urgently and seriously at the very sensible and practical proposal that the noble Lord, Lord Fowler, has put forward.

Baroness Dean of Thornton-le-Fylde: My Lords, I, too, support the amendment of the noble Lord, Lord Fowler. A number of us in this House think the current annuity provisions and requirements are wrong anyway and need changing. The amendment does not do that: it simply meets the current circumstances that are facing people. Yes, we have had and always will have ebbs and flows in the stock market, but the current situation is different. There will be no going back; once people have taken their annuity at a much lower return, that will decide their pension for the rest of their lives. There is fairness in the amendment, so I look forward to the Minister's response. It seems fair and equitable to realise and accept that these are extenuating circumstances. There is a time factor related to the amendment, and I hope that the Minister will say that he will move on it.

Lord Oakeshott of Seagrove Bay: My Lords, it seems to be the fashion in this debate for most, if not all noble Lords, to declare their age and pensions arrangements, so I am happy to declare mine. I am 61, so I could be buying an annuity—I just have a defined contribution pension—but, luckily, I have a good salary and do not need to do so now.
	If I were older, the last thing I would want is a temporary suspension, be it for six months or two years, not knowing where I stood. I am afraid that the speeches that we have heard, particularly the powerful speeches from the Conservative Benches, are effective in favour of not this amendment but Amendment No. 77 or Amendment No. 77A, in my name and that of the noble Lord, Lord Fowler, which would permanently raise the limit by a significant number of years. The point has been made very powerfully that people will need a few years to rebuild their pension pots, which have been cruelly savaged by recent market movements. I congratulate the noble Lord, Lord Fowler, on finding an ingenious way to bring his amendment up the batting order, but many of the arguments are essentially those with which we shall deal later.
	Anyone who has experience in long-term pension planning would not and could not support an unknown and temporary suspension. This proposal appears to have been drafted on the back of a fag packet by the noble Lord's right honourable friend David Cameron a week or two ago. We have not seen it previously. I remember jointly moving in this House an amendment with the noble Lord, Lord Higgins, to raise the limits to 85 and then to 80. Even if noble Lords feel that there should be no limit, surely the practical way to deal with the present situation is to support one of the later amendments to raise the limit either to 80 or 85. This amendment produces just uncertainty and confusion. How we do know when the markets will be more normal again? Surely we need at least five years for people who have 30 per cent or 40 per cent of their pot to rebuild it. That is the proper way to do it.

Lord Forsyth of Drumlean: My Lords, I appreciate that there is in history perhaps less experience of government on the noble Lord's Benches, but it sometimes helps to provide a Minister with a way out having rejected one thing. Given what is at stake here, which is many people's livelihoods and pensions, would it not be sensible for the noble Lord to treat the amendment as giving the Government a way out, which can be reviewed subsequently, and deal with the matter immediately at hand, rather than being gratuitous in his comments about my right honourable friend's fag packet? This is an attempt to provide the Government with a way out to help people who are in real need. Does he not see that?

Lord Oakeshott of Seagrove Bay: No, my Lords. I have probably rather more experience advising Governments either than the noble Lord or the right honourable David Cameron. I was a special adviser in the 1974 Government when conditions were even more turbulent, which is why I say what I say. I also have 32 years' experience of pension fund investment management. I believe that serious people in government have been thinking about compromise, which would, by however many years the limit were raised, be sensible and sustainable in the long term, but no serious Government would be able to accept the way forward proposed by the amendment. That is why I do not think that this proposal will work and we will not be able to support it. However, I hope that noble Lords will support Amendment No. 77A of the noble Lord, Lord Fowler, which is very sensible.

Baroness Greengross: My Lords, I support the noble Lord, Lord Fowler. The amendment is a modest but effective way of dealing with the present, unfortunate situation, which will affect a lot of people. I shall also support the noble Lord, Lord Oakeshott, later. The amendment is a sensible way forward. It deals with the crisis at the moment and behoves us to support it.

Baroness Howe of Idlicote: My Lords, I was quite amazed by the various contributions to the debate and became more convinced as it wore on. Being 75-plus, I am glad, I suppose, that I have been able to take my annuity, although I wriggled like mad at the time, because, it will not surprise any noble Lords to know, annuities are not my favourite subject and they discriminate against women.
	I am amazed by the views of the noble Lord, Lord Oakeshott, on this amendment, because I see it as being a temporary arrangement that cannot last for more than two years. My goodness, if the situation that we are now in lasts only two years we will be very lucky indeed. The amendment has a degree of flexibility attached to it, although I am equally likely to support raising the age of retirement, not least because I shall again have the opportunity to argue my case about the sex discrimination that exists. What the noble Baroness, Lady Hollis, said, with her background and knowledge was, as always, convincing in every way, although I also thought that the noble Lord, Lord Fowler, moved the amendment very thoroughly. I am just surprised that so little attention has been given to any of this in the other place.

Lord McKenzie of Luton: My Lords, this has been an interesting debate. I will start by comforting noble Lords with the fact that the Government do not feel that they need a way out of this issue. I very much agree with the noble Lord, Lord Oakeshott, that the debate has been around 75 or some other date. It has not focused on issues of temporary suspension. That is a significant issue. Stakeholders out there in the pensions community are not enamoured of this suggestion either.
	As the noble Lord, Lord Fowler, said, we face a global financial crisis that is imposing lots of challenges. The noble Lord, Lord Forsyth, said that we should be doing everything that we can to encourage people to save and I very much agree with that. That is why the Government have taken action to produce stability in the banking system through the measures that the Prime Minister and the Chancellor have announced. That is why the measure that is before us today in this House—and has been for several weeks—is about automatic enrolment into pension schemes to encourage further saving. That is why the Government introduced the PPF to protect people who might have lost their savings and, after some challenging debates, have dealt with VAs to protect people who lost their pension savings. That is why we strengthened the role of the Pensions Regulator, which we will come on to later. We have been encouraging people to save in this environment.
	The amendment would allow suspension of requirements to buy an annuity by the age of 75. I will take this opportunity to clarify that there are no such requirements on the statute book. The noble Lord, Lord Crickhowell, hit the nail on the head with understanding what the regime says. The requirement is to have started to draw an income—either through an annuity, a pension scheme or, since 2006, an alternatively secured pension. There is nothing that says you have to annuitise by the age of 75. That is an important distinction and I want to reiterate that: nobody is forced to buy an annuity with their pension savings.
	Indeed, my noble friend Lady Hollis advanced the proposition, as she has before, that people should be able to take a modest income out of their pension pot and withdraw tax savings, and then the rest has nothing to do with government policy. In essence, that is exactly what alternatively secured pensions achieve. Under an ASP, you are required to take between 55 per cent and 90 per cent of the annuity value of the pension pot. If there is anything left at the end of the day not taken as an income it has a tax exit charge. That is exactly the proposition advanced by my noble friend.

Lord Crickhowell: My Lords, is it not remarkable that, having tried desperately to minimise the number of people who took this route and suggesting that it was only introduced for a small number of religious objectors, the Government now turn around and say, "There has never been any pressure to buy an annuity. It is entirely a myth that has been thought up by the Opposition"? This is an extraordinary statement from the Minister, and an extraordinary development in government policy.

Lord McKenzie of Luton: My Lords, it is not. I was stating a matter of fact and the law. There were changes in 2006 to the alternatively secured pension regime, but I am doing no more than reiterating what the law says.

Baroness Hollis of Heigham: My Lords, will my noble friend clarify to the House what happens to the residual money in the pot of ASP on death? Where does it return to?

Lord McKenzie of Luton: My Lords, it depends upon the precise arrangements. In some instances it goes to charity but, if it goes to people with heirs, then there is an exit charge on it which does exactly what my noble friend was proposing: drawing and clawing back the benefits of the accumulative tax relief that has been achieved.
	That is how it works, so people must face three alternatives by the time they reach the age of 75. The additional flexibility introduced by the Government in 2006 allows people to leave their pension funds invested indefinitely beyond the age of 75 and an alternatively secured pension. The only requirement is to draw down an income from the fund of at least 55 per cent of that which would have been provided by an annuity. Consequently, suspension would only really benefit those who do not need to take any income from their pension savings and who may therefore wish to use them as a means of making bequests partly funded by the taxpayer.
	I see the noble Lord, Lord Forsyth, bristling at this point; let me see if I can help him. Should you sadly die before reaching the age of 75, and before an income has been crystallised, then, routinely, the fund goes tax-free—free of inheritance tax to survivors. Of course, once you are into an income-crystallisation event—whether annuitisation or an alternatively secured pension—that is not the case, as I have just discussed.
	I am aware of the strength of feeling on this issue; I have seen it in today's debate. However, I ask noble Lords to consider the implications of such a suspension, the point that the noble Lord, Lord Oakeshott, focused on. A temporary suspension of the income requirements, either just for annuities or for all means of drawing an income, would add uncertainty, complexity and cost both to those making pension savings and the companies providing pensions and annuities. Those approaching retirement would face uncertainty about the choices that they must make and when they must make them. Annuity providers and pension companies would be faced with the same uncertainties and the additional costs in terms of system and literature changes that may well be passed on to consumers. There are systems in place that are currently geared to events at the age of 75. If you had to suspend them, not knowing when they were going to be reinstated or at what time, that would present real, practical commercial challenges to providers; go and talk to them and they will tell you that that is the case.
	We should also consider the message that would be sent out to people by instigating such a suspension. There is a risk that those approaching retirement would believe that taking an annuity is not the right thing to do. While delaying annuitisation may be something that some people decide is in their best interests, and which they are free to do under the current framework, there are vital issues that they would have to consider in taking such a decision. After all, there is no guarantee that their assets will improve or even maintain their value. It is also possible that annuity rates could fall, potentially reducing the income available. In combination, a stagnation or fall in asset prices alongside a fall in annuity rates would have a severe impact on the income available from a person's pension savings. For anyone relying on their pension savings to support themselves in retirement, these are serious risks. It would be irresponsible for the Government to do anything which could lead people to delay taking their pension income and expose themselves to such risks without fully thinking through the consequences.
	There are also problems inherent in allowing an option to extend suspension. This would compound the uncertainty faced by consumers, companies and advisers. Those approaching retirement need certainty and stability. Those advising savers and those providing income products need to know that the rules which govern them are not subject to change on the basis of an undefined set of criteria.
	The approach to retirement is an important and potentially complex time for many people. Pension companies begin to contact people with their options up to a year before they reach retirement age. For a suspension to be introduced potentially without the necessary lead-in times would do little other than cause confusion and could send out the wrong message to those faced with a very important decision about their future income.
	I appreciate that in the current economic climate there are real concerns about the impact of the falls in the stock market on retirement incomes. However, the impact of these falls will not necessarily feed through directly into the value of an individual's savings. The amount of income that a pension fund would provide via an annuity is based on two main items, annuity rates and fund size. Recently, rates on annuity levels—the most popular form—have increased due to rising corporate bond rates and are now around a five-year high. It is also important to remember that pension funds rarely invest exclusively in equities. Other investment methods have not been affected in the same way, and therefore not all pension funds will have suffered the same reductions. Indeed, many pension schemes offer a "lifestyling" option. For stakeholder schemes, it is mandatory for the default option to include lifestyling.
	I hope I have explained that a temporary suspension is unnecessary because current rules already allow flexibility to delay annuitisation beyond age 75, and potentially damaging because it would create enormous uncertainty impacting on all parts of the pension system, from individual savers to advisers to pension companies.

Baroness Hollis of Heigham: My Lords, I am sorry to keep intervening, but is my noble friend arguing against the amendment on the ground of pre-emption because, if it were passed, we could not then discuss the subsequent Amendments Nos. 80 and 85, which, given his emphasis on the uncertainty of this as opposed to other ways forward, might be measures that he would favour?

Lord McKenzie of Luton: My Lords, I am perfectly happy to offer my noble friend the Government's view on those amendments when we reach them. As regards the amendment we are discussing, I argue that temporary suspension is simply not the way to address this. It would compound a challenging issue. My noble friend rightly referred to the fact that people are building up increasingly bigger pots in DC schemes. If you project forward 20 or 30 years, particularly with auto-enrolment, that will increase substantially. However, in the second quarter of 2008, there were something like 114,000 annuity sales, nearly 40 per cent of which were for pots of less than £10,000 and only 13 per cent of which were for pots in excess of £50,000. Therefore, we are a long way from that situation at the moment.
	I am disappointed that when we debate this matter the focus of attention is on people at or around or approaching 75, whom I have sought to deal with. However, we have not discussed people who might be in more challenging circumstances—those who annuitise early because they need the income. Those people have very real deadlines driven by their economic circumstances. Frankly, I am more concerned about those people than those who have the options I have outlined. I think that the temporary suspension is the worst of all options that we face at the moment.

Lord Skelmersdale: My Lords, at the end of the noble Lord's remarks, which, like some of my noble friends, I found almost unbelievable, he referred to people needing to take an annuity at an earlier stage. Surely the whole point about that decision is that it is influenced by their individual circumstances; it is not imposed by government or anyone else.

Lord McKenzie of Luton: My Lords, I thought we were discussing the practical circumstances that people face and what current equity values have meant for individuals. I was simply making the point that if somebody needs to convert their pot into an income because they need that income, that is very much a deadline for them now, even though they may not even be close to 75. That point is reinforced by the fact that only 5 per cent of people annuitise after 70.

Lord Fowler: My Lords, frankly, that was a deeply disappointing reply from the Government. The Minister talked about uncertainty. The uncertainty is caused by the worst financial position that we have had in this country in living memory; that is the uncertainty that would-be pensioners are living with.
	It is significant that out of 10 speakers apart from the Minister, only one, the noble Lord, Lord Oakeshott, argued against the amendment. I thank my noble friend on the Front Bench for his support, and I thank my noble friend Lord Sanderson. My noble friend Lord Forsyth pointed out that the people who we are harming are those people who have done the right thing and have saved for their retirement. Surely the aim of policy should be to help them, not to damage their interests. The noble Baroness, Lady Hollis, made a powerful speech, which was made all the more powerful because of her knowledge as a former Pensions Minister. She rightly said again that the impact of this will be on future pension policy, and it will be profound. We want to encourage pension saving, not discourage it.
	The noble Lord, Lord Crickhowell, made a very interesting point about alternatively secured pensions. The Government have suddenly become the greatest supporter of alternatively secured pensions. We never heard that argument from the Government before; up to now, they have regarded it as a bit of a loophole. Up to now, they have said, "Okay, the Plymouth Brethren can do it". I had not realised that this was a central plank of government policy, or that they were putting it forward for everyone up and down the country. I had not realised that they were saying to financial advisers and banks, "Please tell people to take alternatively secured pensions". This is entirely new; I do not remember that argument. If the Minister will forgive me for saying so, it is a very odd line. He is really saying, "We have this rule on compulsory annuities, but take a bit of advice and you can get around the rule". It is the most extraordinary excuse that I have heard from a Minister for many years.
	I thank the noble Lord, Lord Howarth, and the noble Baroness, Lady Dean, for their interventions. The noble Baroness said that there were ebbs and flows in the stock market, but we are not dealing with ebbs and flows. The comment made by the deputy governor of the Bank of England, Charlie Bean, was:
	"This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history".
	That is not an ebb and flow; that is a crisis. The Government keep on saying that they will have policies to help people through this crisis. We challenge them to provide something in this area, and they do absolutely nothing.
	The noble Baroness, Lady Greengross, with her vast experience in this area, also supported the amendment, as did the noble Baroness, Lady Howe. The only person who argued against it was the noble Lord, Lord Oakeshott. To be honest, I am puzzled by his position, although I could put it more strongly than that. He seems to basically be saying, "If you will not have my amendment, you cannot have any other amendment". I am quite happy to go with my amendment if that is his only argument. The fatal flaw in his argument is that he is arguing for annuities at the age of 85. I do not see any sign whatever that the Government are going to give in to that position, so the noble Lord is arguing with the Government about annuities at 85. If the Minister wants to stand up and say that he will introduce annuities at 85, I am happy to give way, but I very much doubt that he is.
	In those circumstances, I really would ask the noble Lord, Lord Oakeshott, to reconsider his position, because he is going forward on a proposition that will be rejected by the Government. This is the whole case—and I do not doubt the noble Lord's goodwill—but we are both putting forward proposed solutions, and the Government are saying no to everything. This is a moderate, middle-of-the-road proposition.
	This is a question of justice for men and women who have saved for their future, but have been caught in a financial storm which they have had no way of influencing and very little chance of avoiding. We have an opportunity of seeking to deal with that injustice. That was the challenge to the Minister which he was unable and unwilling to take up. In those circumstances, I would like to test the opinion of the House.

On Question, Whether the said amendment (No. 69A) shall be agreed to?
	Their Lordships divided: Contents, 129; Not-Contents, 156.

Resolved in the negative, and amendment disagreed to accordingly.
	[Amendment No. 70 not moved.]
	Clause 100 [Effect of entitlement to guaranteed minimum pension]:

Lord McKenzie of Luton: moved Amendment No. 71:
	Clause 100, page 53, leave out lines 7 to 15 and insert—
	"(5) The Secretary of State must require the Government Actuary or Deputy Government Actuary ("the Actuary") to prepare a report on how actuarial equivalence should be determined for the purposes of this section.
	(5A) In preparing the report the Actuary must consult such persons as appear to the Actuary to be appropriate.
	(5B) The Secretary of State must lay the report before Parliament.
	(5C) Having considered the report, the Secretary of State must by regulations make provision for determining actuarial equivalence for the purposes of this section.
	(5D) If any recommendation in the report is not followed in the regulations, the Secretary of State must prepare and lay before Parliament a report explaining why."

Lord McKenzie of Luton: My Lords, before I explain Amendments Nos. 71 and 72, it might help the House if I briefly remind noble Lords of the Government's proposals with regard to additional state pension simplification. Under our proposals, people retiring from 2020 will have all their accruals of the different forms of additional state pension up to 2012 rolled up into a single consolidated cash value. This will greatly simplify the way such pensions are calculated.
	Broadly speaking, for individuals contracted out of SERPS—the additional state pension between 1978 and 1997—a contracted-out deduction needs to be applied to the consolidated amount. The contracted-out deduction, which can currently vary in relation to the additional state pension, both before and after retirement, will need to be fixed using the principles of actuarial equivalence. This new deduction will be calculated so that it has the same overall actuarial value as the contracted-out deduction under the current rules. The new deduction can then be taken from the consolidated SERPS pension.
	I turn to Amendments No. 71 and 72. In Committee, following amendments tabled by the noble Baroness, Lady Noakes, I agreed to consider whether it should be mandatory for the Government to commission a report from the Government Actuary's Department on determining actuarial equivalence. It has always been the Government's intention to commission such a report from the Government Actuary's Department. The amendments I have tabled will make that mandatory. I have also considered whether it should be mandatory for regulations to be made based on that report. While it is absolutely right that the Government should fully consider the impartial Government Actuary's report, the final decision on whether regulations are made with reference to that report should be a government decision. To do otherwise would, in effect, go against an important principle of legislative competence, which is that it is for the elected Government of the day to propose legislation and for Parliament to approve it. However, to ensure openness, our amendments commit the Secretary of State to lay the Government Actuary's report before Parliament. Regulations setting out how actuarial equivalence will be achieved will be subject to debate in both Houses. Furthermore, should the Secretary of State not be minded to follow the recommendations in the Government Actuary's report, we are proposing that a report must be laid before Parliament explaining why. I hope that I have been able to reassure the noble Baroness that we have taken on board the key concerns that she raised in Committee and that she will understand why we have not been able to agree absolutely 100 per cent. I beg to move.

Baroness Noakes: My Lords, I thank the Minister for tabling this amendment. I was much encouraged in Committee when he said that he viewed my amendments "with some warmth", but of course when we got down to the small print in his detailed response he revealed a difference of view about who should call the shots on actuarial valuation. That difference remains today.
	The amendments that I spoke to in Committee made it clear that it should be the Government Actuary who determines actuarial equivalence. That is, after all, what actuaries spend all those years learning to do. The Government's amendments leave the discretion in determining actuarial equivalence with the Secretary of State. I cannot ever recall a Secretary of State having an actuarial qualification and so being qualified to opine on actuarial equivalence.
	The truth is that the Government like to pick and choose actuarial assumptions, as we have seen, whether it was DWP Ministers or Treasury Ministers working behind the scenes. When it came to contracted-out rebates, they ignored the Government Actuary's advice on the basis of something that they called "sustainable affordability".
	I accept that the Government have improved on the clause that they introduced initially, as they must now involve the Government Actuary and explain to Parliament if they do not follow his advice. Moreover, the regulations will be subject to the affirmative procedure. On that basis, I have decided not to seek further amendments and to accept my half a loaf.

On Question, amendment agreed to.

Lord McKenzie of Luton: moved Amendment No. 72:
	Clause 100, page 53, line 17, at end insert—
	"( ) In section 185(2) (consultation) at the end of paragraph (c) insert "or 46A(2); or".
	( ) In section 186(3) (parliamentary control) before paragraph (a) insert—
	"(za) regulations made by virtue of section 46A(5C), or"."
	On Question, amendment agreed to.
	Clause 112 ["Implementation Period"]:

Lord Tunnicliffe: moved Amendment No. 73:
	Clause 112, page 58, line 28, leave out "or decree" and insert ", decree or declarator"

Lord Tunnicliffe: My Lords, Clause 112 sets out the timescale for a pension compensation credit to be implemented. The four-month period begins on the later of two dates: the transfer day or the first day the board is in receipt of the relevant documents. The relevant documents include a decree or order relating to the divorce, dissolution or annulment. This technical amendment adds "declarator" to that list. A "declarator" is a term in Scottish law that is in some cases used instead of a reference to an order or decree. For the reference to annulment in the clause, reference to "declarator" needs to be added in order to cover the position in Scotland, where the types of annulment in question come about by declarator of nullity. This amendment ensures that the provisions are triggered in the same way whether in Scotland or in England and Wales by accommodating the different terminology used in the different jurisdictions. I beg to move.

On Question, amendment agreed to.

Lord Kirkwood of Kirkhope: moved Amendment No. 74:
	Before Clause 123, insert the following new Clause—
	"Independent Public Sector Pensions Commission
	The Secretary of State shall establish an independent commission to be called the Independent Public Sector Pensions Commission to evaluate the terms, benefits and costs of public sector pensions; and report to Parliament within two years of the day on which this Act comes into force."

Lord Kirkwood of Kirkhope: My Lords, the provenance of this new clause, tabled in my name and that of my noble friend Lord Oakeshott of Seagrove Bay, was my looking, over the summer, at the debates in your Lordships' House on the 2007 Pensions Bill. In June of that year, my noble friend eloquently moved a not dissimilar amendment in Committee. Indeed, the amendment was more widely drawn in that it would have provided for an independent commission with a remit to analyse research and provide information on pension costs and public policy issues over the longer term. I am grateful to other colleagues who have tidied up some of the wording, which improves the new clause which, for the purposes of clarity, is intended to be of permanent standing and not a temporary commission.
	Over the summer I was able to draw on the very important publication of the Pensions Policy Institute, of which I am a governor. In 2008 it published an assessment of the Government's reforms to public sector pensions. If I were concerned before, I was even more concerned after reading the document at some of the gaps in our knowledge in looking forward—very long term—to some of these important areas of public policy. The Pensions Policy Institute looked at the background to the 2002 Green Paper, which reformed public service pension provision, and at how those changes impacted on public sector employees, how the financial stability of the schemes were improved over the longer term, whether it closed the gap between public and private pensions, and whether public sector pensions made up for lower pay, which was an important part of the underlying argument when the Government changed the scheme for public sector pensions.
	The report treats the subject very seriously; it repays careful study and I commend it to colleagues. It has convinced me that Parliament does not yet have all the facts in the public domain to enable it to make sensible and objective decisions about the future costs that the country may be facing in this important public policy area. These issues are not new; they have been debated before, but bringing them back in this Bill is important. For the reasons that we have just been discussing on annuities, the situation on pension provision is now more acute this year than last. Last year's concerns are even more relevant and need consideration in today's uncertainty about the future of savings schemes generally and private sector provision particularly, which is being delivered more and more through defined contribution schemes.
	There is great potential for this issue to be debated in a non-constructive way; a lot of ill-informed comment can be expressed. Big numbers are involved in unfunded liabilities, and the rest, which can scare people. In the run-up to the next general election, debate may be less informed than it might be if we had transparent access to the facts. The Government can state that the 2002 Green Paper reforms were put in place and are only just maturing—the last of them were introduced in April 2008—but, by accepting the new clause, which seeks greater transparency in the future, they would have a better chance of instilling in the electorate confidence that they are taking the issue seriously. Indeed, it needs to be taken seriously.
	I want to quote from this important PPI report. First, the section dealing with the financial stability of public sector schemes puts the debate into context, as there are issues that need to be considered.
	The paragraph headed:
	"Will the reforms improve the financial sustainability of the",
	public sector "schemes?" states that:
	"Public sector pensions are projected to grow more quickly over the next twenty years than any other area of state spending for which long-term projections are available. Over this period, spending on unfunded public sector pensions is projected to grow from 1.0% of GDP to 1.4% of GDP in 2027/8, after allowing for the savings from the recent reforms. This is an increase of 40%, which compares to an increase of 17% for long-term care, 16% for health and 14% for state pensions over the same period".
	Of course, those are percentage increases, not absolute figures—we must bear that in mind—but that gives us a sense of the extent to which the current provisions after the reforms will build in long-term state spending over the next 20 years or so.
	The latest estimate for the future unfunded public sector pension schemes liability that I have been able to find is from 2006. The figure is set at £650 billion. It would be of great interest to know whether the Government have a more current estimate of unfunded liability than that. Obviously, as the report makes clear, it depends a lot on discount rates, but the House is entitled to a much more up-to-date figure than one from 2006, which is likely to be higher than £650 billion. If the Minister can tell us the current estimate of liability, that will be very useful.
	I have also not been able to find whether the Government have published an overall estimate of the year-on-year cost savings that they would expect in future as a result of the 2002 Green Paper reforms. We know—the then Chancellor, Prime Minister Brown, told the Treasury Select Committee—that the Government were anticipating saving about £13 billion over the next 50 years. That sounds like a big saving, but when you consider that there is a public sector contribution of £10 billion each year to public sector pensions, that puts it in context.
	Just using those two examples, I make the case that it is nearly impossible, as far as I can judge with the information available to me, to assess the long-term affordability and sustainability of the 2002 Green Paper reforms. If that is the case, that is a serious matter for Parliament and it becomes an issue of what steps we need to take to get hold of that information so that judgment can be made.
	I have no difficulty with the principle of unfunded public sector schemes being paid for by the taxpayer. I understand that those are contracted, negotiated arrangements between employers and employees, and that the trade unions take the very strong view that pension payments are deferred pay; I perfectly well understand all those issues. I am making no judgment about that in the proposed new clause; I am saying that we do not have the information available to us as policy-makers to make sensible judgments on important matters over the long term in the area of public provision of pensions.
	I refer back to some of the advantages that we have been able to derive from work done by what were, admittedly, ad hoc groups in the past. I remember that the pensions provision group, which preceded the Turner commission, made a valuable contribution on the state pension sector some years back. The Turner commission also made a tremendously important contribution by illuminating, in a way that was trusted and independent of government, the whole background to the pension reforms that the Bill introduces. It helped to establish the consensus necessary to resolve some of these problems. The Pensions Commission comprised Miss Jeannie Drake, John Hills and Mr Adair Turner, as he was before he came into this House. It was not a big operation, a huge quango or a huge establishment, but it made a tremendous contribution to the way in which policy was debated after the report was produced.
	The proposed new clause seeks to set up a standing body with characters of that calibre who are independent and are within the sequency of government and the department's circle of knowledge so that they have access to the best, most relevant and up-to-date figures, working with the Government Actuary's Department and regularly furnishing high-quality information that looks a long way forward. This is not the stuff that is easily traded in a normal political debate; it is an attempt to get more objectivity. Much of it is estimated, because many changes can be made in 20 years. The research and analysis that is available through such a route is invaluable when trying to get a better handle on exactly what provision needs to be made in Parliament.
	Unless things are happening that I do not know about, the Government are not spending enough time looking at ageing as a policy. Ageing is not just a DWP issue; it affects everyone. I read papers at the weekend that reminded me that people in the 50 to 64 age cohort and the 64 to 75 age cohort have a much higher carbon footprint than other age groups. There is a whole raft of ageing-related issues. By 2031, the country will have 27 million people over 50 years of age. That is 41 per cent of the population. It will substantially change the way in which we run public services, and is not debated to the extent that it should be. The independent commission suggested by my proposed new clause is only part of that. The proposed new clause which my noble friend Lord Oakeshott tabled last year would have had a better chance of addressing broader pension provision. If the exclusive focus on public sector provision is too difficult for the Government, any truly independent commission set up to look at pensions should start by looking at the potential imbalance between public and private sector provision in the next 20 years. Perhaps that is what the Government are setting their face against in the amendment.
	The House should look at tests that need to be met over the long term. I read with great interest the comments made by the noble Lord, Lord Turner, in Committee last year. He rightly talked about affordability, and the reasonableness of expenditure relative to the other public needs, being a cardinal test that needs to be passed. He also talked about fairness relative to the private sector. The PPI report adverts to this, and although it does not make judgments, it shed light on the relativities between the private sector and the public sector.
	Another point made by the noble Lord, Lord Turner, concerned fairness within the public sector with regard to two-tier provision. Some final salary schemes have had to close because of the inherent discrimination involved. I do not want to find that, because of lack of forethought, preplanning and active, dispassionate consideration, public sector pensions suddenly become a hot political potato because they could be seen to be unstable at some point in the future. The only way that Parliament can be sure that it is attending to these important matters timeously and in a way that allows thought to be directed at the problems is with an independent commission in charge of its own agenda, working in a standing capacity and providing information in a transparent manner. That is what Parliament needs to make sensible decisions in these areas in the future. I beg to move.

Baroness Turner of Camden: My Lords, I am sure that the noble Lord will not be surprised to learn that I oppose the amendment. I do so because the present salary and pension structure for civil servants is the result of agreements between the Government and the unions, and because it is generally accepted that the pension package is an element of deferred income. As has already been stated, this is a question of deferred pay for the civil servants covered by the package. It is true that the present arrangements are non-contributory, but I understand that Civil Service salaries are effectively reduced by around 6 per cent in comparison with similar employment in the private sector to account for the non-contributory aspect.
	We really are not talking about highly paid people. The average Civil Service pension is around £5,400 a year, with a quarter being less than £2,000 a year. Any attempt to make savings in public sector pensions will have a greater impact on women pensioners who have lower pensions than men due to their lower average salaries and shorter service records. Furthermore, if those pensions are taken away, the taxpayer will fund further payments under pension credit, since the people who would be disadvantaged if this package were removed would be those eligible for pension credit. As we all know, many of those who are eligible to receive means-tested benefits do not actually get them. Pension credit is not an easy way of covering the loss to those who otherwise would be compensated through the Civil Service pension scheme.
	I understand that Civil Service pensions have already been through a process of evaluation and reform. The principles for reform of the scheme were agreed by the Government and the TUC in the Public Services Forum in October 2006. These principles recognise that public service pensions are a key benefit of public service employment and should be celebrated as such. It is important to maintain their good quality through retaining defined benefits and index linking. That is an important commitment. If the amendment to establish a commission was accepted, those covered by the present arrangements would be concerned lest the Government attempted to go back on what has already been agreed in the process of negotiations. I therefore urge that the amendment should not be accepted. We discussed this proposal during proceedings on a previous pensions Bill and the House rejected it. I hope that it will do so again. We have a negotiated agreement and there would certainly be difficulties if it was thought that any attempt was being made to go back on what has already been agreed. I suggest that this amendment should be decisively defeated.

Baroness Noakes: My Lords, we wholeheartedly support the principle behind the amendment just moved by the noble Lord, Lord Kirkwood, and I agree that the recent report from the Pensions Policy Institute is valuable because it illuminates what we know and what we do not yet fully understand. We on these Benches have warned for some time that the increasing disparity between the pension benefits available in the public sector and those in the private sector is unsustainable. Increasingly, the country reflects a tale of two workforces. The latest official statistics show that employee membership of defined benefit schemes in the private sector continues to fall, with around 1.5 million still in open DB schemes, although the Association of Consulting Actuaries uses a much lower figure of around 900,000. On the other hand, 5.2 million people are in public sector defined benefit schemes which are obviously still open. Not only do these schemes give full DB benefits in retirement, they often have much earlier retirement dates than in the private sector.
	The result is a huge cost burden which taxpayers have to pick up. Some of the schemes are funded, which is imposing a considerable cost on the services to which those employees are attached, but as the noble Lord, Lord Kirkwood, pointed out, many schemes are unfunded. The noble Lord also told us how difficult it is to get a fix on how much is actually involved, partly because of the delay in the numbers coming out and partly because of the assumptions that are used. If we add together some figures that were available in 2006 and 2007, we believe that the estimate on the Government's assumptions is around £760 billion. But those figures use the perfectly ludicrous assumption of AA corporate bond rates in the discounting when it is obvious that the only correct rate to use for the state's liabilities is the risk-free gilt rate. If that rate is used, the Institute of Economic Affairs earlier this year came up with a figure of £1,071 billion, which itself is out of date because the figure will be higher even now. But just that figure represents 73 per cent of GDP. That is what is overhanging our economy, which, as we know, is in a precarious state as it is.
	If the Government were a private sector company, which of course they are not, the answer to the financial facts would be clear, because we can see what boardrooms have been doing consistently over recent years. They have been closing their defined benefit schemes to new entrants and have been revisiting whether or not future accrual would be modified or possibly even stopped. What has happened in the private sector is plain, and I outlined it earlier when speaking to my conditional indexation amendment. However, the Government live in a completely different world.
	I understand what the noble Baroness, Lady Turner, said about a negotiation between Ministers and the TUC, but the plain fact is that that negotiation has sold taxpayers down the river. The solution at the end of that negotiation was a minimalist one, and there could not have been less produced. The noble Lord, Lord Kirkwood, gave us the figure of £13 billion over 50 years—around 1 per cent of the total liability on the assumptions I discussed earlier. Indeed, it is interesting to note that when the noble Lord, Lord Turnbull, was with us—he has much expertise in this matter and it is a shame that he is not in his place today—he described all criticism of the deal as entirely justified.
	Noble Lords on these Benches find it difficult to support amendments that involve public expenditure. I am not sure that a pensions commission to look at public sector pensions would necessarily involve a large amount of public expenditure, and could even be contained within the margins of the DWP's existing provision, but it is important to know how much it would cost. As I have explained, we believe that there is a big issue here and that any responsible government should address it in the future, if only because there will be anger from taxpayers who have to sustain a level of pensions that they themselves cannot even hope to have. Whether we need a report to make that happen is perhaps a moot point, but the issue is very important and one that must be addressed.

Lord Oakeshott of Seagrove Bay: My Lords, I thank my noble friend for his remarks about my eloquence last year. I hope he will be rather more effective than me in getting this amendment through the House. I share very much the concerns of the noble Baroness, Lady Noakes, about the figures she quoted and I hope she will feel that if there is a very modest element of government expenditure involved in the amendment it is a drop in the ocean compared with the potential savings and the importance of properly identifying what are the costs of allowing these liabilities to continue.
	I again pay tribute to the Pensions Policy Institute and the Nuffield Foundation which financed its excellent report on assessing the cost of public sector pensions which has recently been published. They have performed a signal service for informed debate in this crucial area. As always, the report is written in balanced and measured tones, but the figures contained in it are a substantial and devastating analysis of the unfairness and unaffordability of public sector pensions today compared with the clearly much poorer pension provision for the rest of our citizens who have to pay for the public sector pensions. Who does the noble Baroness, Lady Turner, think is paying for these pensions? Their costs come from taxpayers, and council taxpayers in particular, who, on average, have less good pensions by far than people in the public sector.
	I shall quote some of the figures for the noble Baroness. I do not know whether she has read this balanced report but, on average, employers in the public sector contribute £4,000 per year per employee whereas the figure is £1,600 in the private sector. On pay rates, the report points out that there is no general pattern of public sector pay being lower than that in the private sector. It states that in the comparison between private and public sectors,
	"women and low-skilled male workers seem to be paid relatively more on average in the public than the private sector. High-skilled male workers are paid more in the private than the public sector".
	So there is no general pattern. It goes on to say that,
	"around 20 per cent of private sector employees who earn between £100 and £200 a week are members of an employer-sponsored pension scheme, compared to around 70 per cent of public sector employees".
	The noble Baroness referred to costs, but the negotiations and reforms that she mentioned have had the effect, basically, of producing savings of tuppence ha'penny in the pound on the total cost. The effect of those changes on the taxpayer—and remember the taxpayer is the employer here—is to reduce the employer contribution from 24 to 21 per cent in public sector pension schemes. For example—and this is for new entrants only—in the Armed Forces, the police and fire service, which are the most extreme versions, the contribution has been reduced from 37 to 33 per cent. Again, there is a distinct difference between the retiring age—or the pension age, should I say—in these sectors. So the changes have been very small. In the previous debate we were talking about how the value of private sector pension savings and pension schemes has been seriously affected—that will not change any time soon—but the figures today are even more dramatic.
	No one is saying that the public sector should not go on having high quality pension schemes. What we are saying is that there needs to be proper, detailed, independent, regular analysis, as the Turner commission proposed, of what the costs are and how they should be paid for over the longer term.

Lord McKenzie of Luton: My Lords, we have debated this topic before, as the noble Lord, Lord Kirkwood, and others have acknowledged. We recognise the importance of the issues raised by the noble Lord and I am happy to try once again to reassure him about our intentions. Much of the previous debate perhaps was less about the relevance of a commission—I understand that the proposition is for a standing commission rather than an ad hoc commission—and more focused on the position of public sector pensions as portrayed.
	Our opposition to the amendment is not an attempt to avoid discussion of these important issues; nor does it reflect any reservations as to the usefulness of a commission in subjecting fundamental issues to rigorous scrutiny and establishing consensus on the way forward. As I have made clear, we are enormously indebted to the noble Lord, Lord Turner, and his colleagues for the work of his commission. However, that work having been completed, we feel the priority now is to implement the reforms to pension arrangements in both the public and private sectors that have been agreed in the light of the Turner commission's findings. Noble Lords should note that public sector pension schemes have been undergoing major reforms. This was referred to in a somewhat dismissive way. The reforms already agreed or in train should mean that these schemes remain affordable.
	I shall outline some of the changes that have taken and are taking place. All major public sector pension schemes have been under review since the 2002 pensions Green Paper and, as a result of these reviews, reforms in these schemes are now well under way. These reforms aim to ensure the long-term sustainability of the schemes. Thus far, agreement was reached in May 2006 with teaching unions on a set of reform proposals for the teachers' pension scheme, and a new scheme has been operating since January 2007. Cost sharing with employees and capping of the employer contribution rates form a part of the scheme rules laid down in legislation. The Cabinet Office announced a new Civil Service scheme which has operated since July 2007 and which also included in amendments to the scheme rules laid before Parliament in September 2008 cost sharing and capping. The NHS employers implemented new arrangements for the NHS pension scheme which are also inclusive of cost sharing and capping from April 2008. The new local government pension scheme has been operating since April 2008 and is also due to incorporate cost sharing and capping arrangements. These reforms to the NHS, teacher, local government and Civil Service pension schemes ensure that any future increases in costs will be fairly shared between employers and employees. In addition, the cost capping mechanism will ensure that there will be an upper limit on the cost to the taxpayer should costs increase. Eighty-two per cent of public sector workers are now covered by cost sharing and cost capping.
	Reforms also include increases in normal pension age for new entrants from 60 to 65 for the three main central government schemes, and the local government scheme includes arrangements to phase out the rule that has enabled scheme members to retire without a reduction in pension before reaching that scheme's normal pension age of 65. New schemes for the Armed Forces, police officers and fire fighters have already been introduced in 2005 and 2006. So there has been a significant change.
	It is suggested also that there is a lack of information about public sector pensions. A large amount of information is already publicly available on the terms, benefits and affordability of schemes. Public service pension schemes are monitored on a regular basis through built-in mechanisms such as the annual resource accounts and evaluation reports on the majority of schemes. Alongside these, in 2004 the Government introduced an annual evaluation of the financial sustainability of spending on unfunded public service pensions as part of a long-term public finance report published by the Treasury. The latest report, published alongside the Budget Report 2008, makes it clear that the long-term spending on unfunded public service pensions is affordable and sustainable.
	I say to the noble Baroness, Lady Noakes, that one can come up with all kinds of figures depending on what discount rates you apply to projected streams of figures, but the real test for unfunded schemes should surely be the Government's ability to fund them year by year on a long-term basis. That is exactly what the long-term financial report seeks to address.
	I do not believe it is necessary to establish a commission further to review or evaluate these schemes. Indeed, we fear that such a body, which could not come free of charge, would act as a destabilising influence, a point made by my noble friend Lady Turner, compromising the successful implementation of reforms that are starting to deliver better value for taxpayers. I hope that the noble Lord is reassured by what I have said and will feel able to withdraw his amendment. I suspect not.

Lord Kirkwood of Kirkhope: My Lords, I am grateful to the Minister for that reply, but it just will not do. I set myself a little test of whether we would be given two particular figures. The first was the Government's figure for unfunded liability, and I noticed that we did not get an answer to that. The figure was from 2006, but this is 2008. These are big sums of money. Speaking for myself as a parliamentarian, I think we are entitled to that level of information at the very least.
	The second thing that I was anxious to see whether the Government would share with us was the essential year-on-year cost saving from the 2002 Green Paper reforms. Answer came there none on that question either. If the Minister cannot give me figures for these things, that illustrates the fact that this is very hard. He talks about available information, but some of it is technical and you have to know where to look for it. I did my best over the past week to get all the information that was available to me. If I had not had the Pensions Institute's report, I would have been struggling to form a view about whether this was a sensible thing to do.
	There is a huge amount at stake here, and this is an issue for Parliament. If we as parliamentarians are willing to let the Government get away with not being required to produce the information that we need to make objective decisions, we are not doing our job properly.

Lord McKenzie of Luton: My apologies, my Lords; I did not address those specific questions. With regard to the unfunded public service pension liabilities as calculated, the latest figure I have is the one the noble Lord cited, £650 billion. That figure looks at a stream of payments and applies some form of discount rate to it.
	I urge the noble Lord—this is the more important thing—to look at the projections for public service pensions that are made in the long-term public finance report, because they reflect the agreement made in 2005. The latest report, published in March 2008, showed that expenditure on unfunded public service pension benefits remains affordable; it is projected to increase from around 1.5 per cent of GDP to a maximum of 2 per cent over the next 50 years. I remind him, when he considers those figures, that they partly reflect that there are now more people working in the public sector than in the past: more nurses, more teachers, more doctors. We should be pleased about that. However, the sustainability of that can be seen in the long-term public finance report.

Lord Kirkwood of Kirkhope: My Lords, I am also grateful for that, although the Minister refers me back to a document that I have already been looking at. Something like a Turner-commission view of that technical document would be much more useful to me as a policy-maker. Of course the Government produce raw technical data, but having an oversight on a long-term basis by people who have a lot of experience in the field, as all three of the Turner commissioners had, adds value in a way that such a commission would but which the raw data that the Minister has adverted to just do not supply.
	I am a simple seeker after the truth. We do not have the information we need to do the job properly, and the amendment would be a way of guaranteeing that all we had was the facts. If that destabilises anything, then that is seriously sad. If people are upset by others being required or commissioned to think about these things carefully and put information into the public domain, then I am sorry, but as a parliamentarian I cannot do the job that is asked of me unless I get the kind of information that at the moment is absent. The amendment is a way of putting that information into the public domain in a way that could be trusted and would help in the long term in an important area of public policy. I would like to test the opinion of the House.

On Question, Whether the said amendment (No. 74) shall be agreed to?
	Their Lordships divided: Contents, 48; Not-Contents, 125.

Resolved in the negative, and amendment disagreed to accordingly.

Lord Fowler: moved Amendment No. 75:
	Before Clause 123, insert the following new Clause—
	"Parliamentary pension scheme member-nominated trustees
	(1) After section 241 of the Pensions Act 2004 (c. 35) (requirement for member-nominated trustees) insert—
	"241A Parliamentary pension scheme: member-nominated trustees
	(1) This section applies to a scheme which is set up under section 2 of the Parliamentary and other Pensions Act 1987 (power to provide for pensions for Members of the House of Commons etc).
	(2) The requirements of section 241 shall apply to the trustees of such a scheme subject to the following modifications.
	(3) Section 241(2) shall be read as if for paragraph (b) there were substituted—
	"(b) are selected as a result of a ballot in which all the eligible scheme members are given the opportunity to vote.""
	(2) Regulation 2(i) of the Occupational Pension Schemes (Member-nominated Trustees and Directors) Regulations 2006 (S.I. 2006/714) is revoked."

Lord Fowler: My Lords, I will be brief as I believe that the proposed new clause will give the Minister the opportunity to say where government thinking has progressed on this point. As I explained in Committee, my aim is basically to bring into line the rules on trustees of the parliamentary pension scheme with those that apply to other contributory schemes, particularly in the election of those trustees.
	As this Bill and other pensions measures show, we are very eager to set down requirements for occupational schemes generally, but when it comes to the parliamentary pension scheme—of which, to declare an interest, I am a member—there is a statutory exclusion from those requirements. The prime example is in the election of some trustees. My amendment would mean that at least a third of the trustees were elected—as is the case outside—rather than appointed, as is the case at present. Currently, eight out of 10 trustees of the parliamentary scheme are serving MPs, appointed by the Whips. One is a Member of this House but he is appointed; recently one member has been nominated by the association representing former MPs but, again, he is appointed.
	The proposed new clause is not an attack on those appointed members; even less is it an attack on Sir John Butterfill, the chairman of the pension trustees, who has carried out some very valuable work trying to modernise the governance arrangements of the fund. But the fact remains that all the trustees are appointed, which is an unsatisfactory position. It is, and was, unsatisfactory for other occupational schemes and it is unsatisfactory here. In my view, contributing members to the scheme and retirement members should both have the right to elect some of the trustees—in my view, about a third.
	In Committee, the Minister responded helpfully to this case and suggested that I meet with the Leader of the House of Commons. I received an encouraging reply from Harriet Harman, and earlier this month I met with her then deputy, Helen Goodman. Again, that meeting was encouraging and useful. Among the points that have now become clearer are that, first, the parliamentary fund could move to a position of elected trustees without the need for legislation at all. The legislation does not exclude the possibility of making such a change. Obviously, I would like the Minister to confirm on the Floor of this House that that is the position. Secondly, one possible model would be to have two sets of elections. A college, made up of contributing MPs and Members of this House, would elect one part, while a college made up of retired MPs and Peers would make up the other. Again, I would like the Minister to confirm that such an arrangement would be possible. Thirdly, and most importantly, my impression is that the Government are sympathetic to this principle. All the words so far uttered and all the correspondence that I have had leads to that conclusion. In other words, they see the advantage and justice of having elected trustees. Obviously, I would like the Minister to confirm that and what they intend to do about it.
	I very much hope that we can settle this in agreement. It is difficult to argue that all-appointed trustees are necessary for the parliamentary pension fund but not for any other scheme in the country. It would be ironic if this obvious extension of democracy were rejected for, of all schemes, the parliamentary scheme. Frankly— and I have précised my case because of the remarks I made in Committee—the ball is now in the Minister's court, and I wait to hear how he replies. I beg to move.

Lord Crickhowell: My Lords, perhaps I may be even briefer than the noble Lord. At an earlier stage, I strongly supported the case advanced by my noble friend. I would add one other good reason to those that he listed: when things go wrong, as they occasionally do—and they have gone wrong in the case of the parliamentary scheme—and corrections and adjustments have had to be made to people's pensions, there is a great deal more confidence in those who are managing the scheme if it is known that they are elected and that the pensioners have had the opportunity to elect and know exactly who represents them, and that there are adequate means of communication between the trustees and those who represent them and pensioners. That was not exactly the case in the past. I hope that the discussions that my noble friend has described will lead to a satisfactory outcome to this problem.

Lord MacGregor of Pulham Market: My Lords, I support the amendment, and do so as a former chairman of the Parliamentary Contributory Pension Fund up to my retirement from the other place in 2001. Perhaps I may make one comment about the parliamentary scheme, which is frequently misunderstood in the media. The parliamentary pension scheme gets wrapped up with all public sector pension schemes, which are unfunded so frequently are non-contributory, as though it were exactly the same as them. The parliamentary pension scheme is like any other private sector pension scheme in that it is contributed—indeed, at one point, for much of my career in the other place, the members' contribution was 9 per cent of salary, and I discovered that only 4 per cent of all occupational pension schemes had a members' contribution as high as that—and it is funded. There is a Treasury contribution, but it is usually negotiated quite tightly and simply represents the contribution that a company would make in the private sector. The parliamentary pension scheme is very similar to all the private sector occupational pension schemes, which have other legislation applied to them.
	As chairman of the parliamentary pension fund, I got the first pensioner trustee nominated, the noble Lord, Lord Stewartby, but as my noble friend Lord Fowler said, he had to be appointed. He was a very good trustee, but it was an appointed arrangement.
	If I had looked at this proposal during my time as chairman, I would have been a little hidebound by the fact that, as I understood it then, it would have required a small legislative amendment, and small amendments of this kind do not command high priority in any government programme. However, if, as my noble friend has just said, this is not necessary, that objection disappears.
	The Pensions Act 2004 considerably increased the responsibility of trustees and the methods by which they became trustees, and that, too, has changed very much since my time. I have always supported the Association of Former MPs in seeking for a pensioner trustee or trustees, as have occupational pension schemes in the private sector.
	I have since become chairman of three pension funds, one of them very large. The contribution of the pensioner trustees is extremely valuable because they raise points that those who are still employees would not raise. As my noble friend said, it is peculiar that we have not yet been prepared to bring the legislative requirements for the parliamentary fund into line with those which we impose on all pension funds.
	There is a lot of expertise in pensions in the other place. Elections for the member-nominated trustees would bring about much additional expertise and be valuable to the pension fund. For all these reasons, I hope that we can make progress and get this proposal implemented whether by legislation or otherwise.

Lord Oakeshott of Seagrove Bay: My Lords, I speak with some trepidation as the only non-member of the parliamentary pension scheme to contribute to this debate. The noble Lord, Lord Fowler, makes a strong case, and, as he knows, we on these Benches are always in favour of election rather than appointment.

Lord McKenzie of Luton: My Lords, I thank the noble Lord, Lord Fowler, for the chance to update the House on the Government's position. I fear that I may disappoint him for the second time today on the substance of his case, but I am happy to update him on the process and the way forward.
	I say to the noble Lord, Lord MacGregor, who made reference to the parliamentary pension scheme, that the Senior Salaries Review Body is undertaking a major review of the arrangements, although it is not expected to report until later in 2009. As the noble Lord, Lord Fowler, indicated, I have previously committed to facilitate engagement with ministerial colleagues so that the issues raised by him could be considered further. I am pleased to say that this consideration has taken place, and I understand that the noble Lord met the former Deputy Leader of the other place on 1 October to discuss his proposals. I understand, as the noble Lord suggested, that the meeting was helpful to both sides, and although a new Deputy Leader, my honourable friend Chris Bryant MP, was appointed in the recent reshuffle, I can assure the House that he is already engaged on this matter and is very happy to continue the dialogue with the noble Lord and others with an interest. Indeed, I am aware that a number of representations from other parties have been made since the noble Lord, Lord Fowler, tabled his amendments in Committee.
	The noble Lord has raised a number of concerns. He has, however, acknowledged that the position relating to the ability to draw on professional pensions expertise in the running of the parliamentary scheme has changed in recent years. This is an important point that is worth reiterating, as there has been considerable work undertaken.
	I have been given assurances that the secretariat to the trustees is now staffed by suitably qualified pensions experts, and that the day-to-day administration has been outsourced to a reputable third party. I understand that the current trustees have the broad range of skills and experience that a body of this type looks for, and that they have either sat the relevant examinations of the Pensions Management Institute or are undergoing a course of study.
	Member involvement is the other issue which the Deputy Leader is looking at. As the noble Lord knows, there is already involvement in the running of the parliamentary pension scheme by members of the scheme. The scheme regulations require all the trustees to be either Members of the other place or former Members who are entitled to a pension from the scheme.
	However, it is essential that noble Lords have confidence in the running of the scheme and it is clear that changes might be necessary to the appointment process to instil a sense of ownership. The Deputy Leader will continue to explore ways of doing this with the noble Lord, Lord Fowler, and other stakeholders.
	I must admit that we do not believe that the major changes that the noble Lord proposes are appropriate at this stage, particularly in advance of the major review of the parliamentary pension arrangements announced by the Leader of the other place in a Written Ministerial Statement on 17 June. The interaction between the various pieces of legislation is complex and we do not yet have a consensus on exactly what should be done. As such it is right that we continue to look at and talk about this issue.
	I assure the noble Lord, however, that, as the former Deputy Leader of the other place made clear in her meeting with him, any changes to the selection process and, if it is felt appropriate, the removal of the Pensions Act exemption could be achieved without the need for primary legislation, which is one of the points on which the noble Lord pressed me particularly.
	The noble Lord also asked whether electoral college arrangements would be possible. I understand that that would be a possible option and we are continuing dialogue to get started on subject and other options. I hope that I can indicate to the noble Lord a degree of process, although the key point is that dialogue should continue. Certainly, my honourable friend in the other place is keen for that to happen. Any changes that might need to flow from that dialogue do not need primary legislation and do not need to be dealt with in this Bill. I hope that that will satisfy the noble Lord that there is some movement on this although I suspect that it is not as robust and fast as he would like.

Lord Fowler: My Lords, the Minister can say that again. He said "not as robust and fast", but this is snail-like progress. It certainly does not in any way fulfil the implied promise in the comments of Ministers up until now. I noticed the careful phrases that the Minister used when he talked about the appointment process, and the careful way that he managed to steer away from the concept of elections. If you are in any other pension scheme the power to elect trustees is a matter of right. That comes with the rations and rightly so.
	My noble friend Lord Crickhowell made an important point: if things go wrong the fact that there are elected trustees, who are to some extent accountable either to contributing members or pensioners, helps the matter considerably. The noble Lord, Lord MacGregor, speaks with the experience of a past chairman. He said that this is a contributory scheme and the Pensions Act 2004 laid down further duties on the trustees. Frankly, I can see no reason whatever why similar rights should not be given to contributing members or retired members of this scheme. That is the position in every other scheme and I cannot see why it cannot be extended to Parliament.
	It seems absurd that Parliament, the home of democracy, does not allow this kind of step forward. The Minister's reply bordered on reactionary in the sense that he offered nothing. Perhaps I overstated that and that he is offering talks. Very well; my colleagues and I will seek to have talks on this issue. However, at the next stage of the Bill this is something that can be brought back. Although we do not require legislation to change the pension scheme, the Bill does not exclude legislation to change that scheme. It is with the background that talks might be entered into that I will pursue this matter with the Minister and the Deputy Leader of the House of Commons. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Oakeshott of Seagrove Bay: moved Amendment No. 76:
	Before Clause 123, insert the following new Clause—
	"Annuities: form of consent
	A provider of a pension scheme must not sell an annuity unless the purchaser has signed a form of consent, to be prescribed and kept under review by the Financial Services Authority, so as to ensure that the purchaser is fully aware of the options available to provide best value annuities in relation to matters including, but not limited to—
	(a) ill health,(b) employment,(c) smoking,(d) place of residence,(e) inflation protection, and(f) any dependents' benefits after the purchaser's death."

Lord Oakeshott of Seagrove Bay: My Lords, this is a straightforward amendment designed to make it crystal clear to both buyers and sellers of annuities that the full range of options must be available, including enhanced annuities. I am old enough to remember that they were called impaired annuities when they first came in, but that was before the insurance company marketing departments got to work and decided to put a rather more favourable spin on them.
	There is an important fundamental point here. Initially, this started when companies offered better rates to smokers or people with diabetes or cancer, but many people are now able to benefit from the fact that there is an enormous discrepancy in life expectancy, even within cities. For example, in Glasgow compared with Bearsden, which is literally five miles away, there is a difference in life expectancy of more than 10 years. The same is true in Sheffield, as my right honourable friend Nick Clegg has pointed out. The real scandal is that, because people are not properly advised by their insurance companies of their options when they come to buy an annuity, only a quarter of those who would be eligible for these best-value insurance annuity products currently buy them. Some 500,000 people retired in Britain last year and more than 400,000 bought annuities, but the best estimates are that people who did not take advantage of this option lost about £1 billion in pensions. That is a sophisticated industry ripping off some of its most vulnerable customers. It is cheating them out of a chunk of their life savings, in many cases, in a way that cannot be rectified. Once you have bought your annuity, that is it for life.
	The insurance industry has been making some changes. The Association of British Insurers, partly under pressure from some effective journalism and obviously from speeches in this House and another place, has moved to some extent. But I do not believe that it has moved enough. I have had useful meetings with Legal & General, the leading provider of annuities and the biggest annuity supplier in the field, which would be happy to see more specific requirements for these options to be made available to people. I have not discussed the exact wording of my amendment with Legal & General, but it would prefer to go further than the rather general guidance coming from the Association of British Insurers.
	In drafting this amendment, I have tried to place the responsibility on the Financial Services Authority, not necessarily to draft the form, but to approve a standard form that all insurance companies must show people buying an annuity, and people have to sign to say that they have read it. If not, people will not have the proper confidence that they have been given those options. We have to face the fact that a commercial issue is involved. By doing this, insurance companies may lose business by having to say, "You could do better elsewhere than the rates we are offering you". There is a hard commercial issue here, but given the fact that the insurance companies are sophisticated and that consumers are not, a serious issue of consumer protection is involved. We believe that this is the right way to ensure that this rip-off—and I say that advisedly—does not continue. I beg to move.

Lord Skelmersdale: My Lords, I for one find this a curious amendment, as the noble Lord, Lord Oakeshott, knows because we discussed it last week or possibly the week before. It is clearly well intentioned, because it is certainly in pensioners' best interests to get value for money when annuitising their pension pots. However, the 400,000 that he just mentioned presumably includes those people whose pension schemes pay out in the form of an annuity immediately after they retire. That is the whole predication of a particular pension scheme. Any generic advice that they received would of course encourage shopping around, not least because a quick reference to "annuities" on Google will tell you that competition is alive and well in the annuities market. However, it is not always the consumer who has to do the shopping around. It might well be the pension scheme that they signed up to while they were in employment.
	Going back to competition, when I looked last week, I found that a man of 65 with a 65 year-old wife and a pension pot of £100,000 could receive a joint-life annuity from one provider of almost £100 a year higher than from another. The difference was even more stark when a compulsory annuity had to be taken by the age of 75; on exactly the same basis, the difference was just over £232. The curious element comes in lines 3 and 4 of the amendment. The form of consent is to be signed to ensure that the purchaser of the annuity is fully aware of the options available to provide even better value for money than the rates to which I have just referred. Thanks to the Minister's comments on the earlier annuities amendments, the little list in the amendment should clearly include ASPs.
	One must ask whether having signed this form is likely to affect a person's attitude to life. For example, it is unlikely that someone aged 65 with a £100,000 pension pot will take up smoking to get the extra £1,300 a year that is available. What about the ex-smoker? Would he go back to smoking? He might well. Much more likely would be a person moving his residence to a less healthy part of the country; the noble Lord, Lord Oakeshott, mentioned Glasgow and Bearsden, just next door to each other. That is a possibility. However, is moving from leafy Surrey up to Glasgow really likely?
	Of course, I accept that there is a postcode lottery in annuity rates, as exists in many other walks of life. However, is it right that such a thing is rammed down people's throats? The same applies in the other direction. Inflation protection and dependence benefits go to reduce an annuity, although they may well be sensible for some people and not for others. Then, of course, there is the confusion aspect that the noble Lord, Lord Oakeshott, is so keen on. Just knowing their effects, the pensioner may well have to weigh up the relationship between several of the specified items in the six paragraphs, which are the minimum a pensioner must sign to having been informed about at the point at which he takes his annuity. How does someone in ill health or a smoker—which are likely to be plus factors—balance these with a possible decision as to whether he also wants inflation proofing and/or dependence benefits? Even worse, if such a list changes the annuity rates across the board, as it well might, who is the gainer? I doubt that it will be the pensioner, especially one who delays taking his annuity until the last possible moment.
	Lastly, is the Financial Services Authority the right organisation to maintain and update the noble Lord's form of consent? I would not have thought that it was the FSA's job. I am not even sure that it should come within the Pensions Regulator's remit, but perhaps the Minister has some ideas on this.

Baroness Hollis of Heigham: My Lords, I have a lot of sympathy with the objectives of the amendment. In a sense, it is almost a subset of the need to get generic financial information. We are talking about ensuring that people use their money in the best possible way when purchasing an annuity, so that they are aware of all the factors that affect it. I could add that gender might be included, but I know that the noble Lord and I do not see eye to eye on this issue.
	I have two questions; whether my noble friend or the noble Lord, Lord Oakeshott, can best answer them I do not know. First, I am not comfortable with the idea of the proposed new clause being in the Bill. I am not sure that this is an appropriate place for it. Secondly, I am not sure that it should not be done straightforwardly by the Financial Services Authority. I see no reason why the Financial Services Authority should not be encouraged, through its consumer panel—chaired by the noble Lord, Lord Lipsey—or whatever, to take this forward. It is a worthwhile thing to do and explore. In so far as the amendment is a useful hook for that debate, I welcome it.
	I do not go along with the noble Lord, Lord Skelmersdale, about people trying to create or avoid moral hazard by shifting addresses and things. That is not likely to happen. However, I am not sure that it is the Government's job at this stage to lay the duty on the FSA, and for the FSA to, in turn, lay the duty on pension or annuity providers.
	This issue should be explored with the FSA, if it is not already doing so. It is a perfectly sound idea. However, from my feeling of where the Bill is going on this, I do not think that it is the right medium for a clause of this sort. In so far as we can encourage the FSA to take this issue forward as part of the post-Thoresen debate, I welcome that very much.

Baroness O'Neill of Bengarve: My Lords, the amendment has a serious consumer-protection objective, but I doubt whether it can achieve it. Consent forms in most areas of life, particularly complex forms, simply do not ensure that purchasers are fully aware of the matters to which they are appending their signature. A supply-side solution is more likely to be effective. A consent form is an ornament too far.

Lord McKenzie of Luton: My Lords, I thank the noble Lord for moving the amendment; it gives us a chance to discuss an important issue. The Government fully support the objective underlying the amendment. People choosing an annuity should have the best possible understanding of the options available to them, and of the potential impact that their choices can have on their own retirement income and that of their dependants.
	However, the Government also believe that it is vital to avoid imposing unnecessary, and potentially costly, legislative burdens on pension savers and annuity companies. The most effective way of ensuring that people make an informed annuity choice is to give them the best possible information at retirement, rather than legislating to make them sign additional forms. I agree with the noble Baroness, Lady O'Neill. If you get people to sign forms and tick a box, there is a great risk that they will take their eye off the ball of what they should really be doing: ensuring that people have information.
	We are actively working to ensure that people have good information about their annuity choices. Legislation and FSA rules require providers to disclose relevant information about annuities to members and for members to sign the contractual documentation to take an annuity. In addition, FSA rules more generally require firms to treat their customers fairly and to disclose relevant information. These rules ensure that a baseline level of information is available in all cases.
	However, we recognise that more can be done. Improving information was a key recommendation of the Government's review of the open market option published with the Pre-Budget Report in 2007. Following one of the recommendations of the review, the Pensions Advisory Service has launched an online annuity choice tool to help people understand the complex issues involved. Initial feedback from those who have used the tool has been very positive. The Government support, and are taking, this type of action to help people make the right annuity choice. Therefore, while I support the spirit of the noble Lord's amendment, it seems unnecessary. There is also the issue of compliance. A process would need to be determined for when an individual did not receive a form, or did not want to sign it, and all that that entails.
	In conclusion, the Government agree that it is vital that people should make an informed choice about their annuity, but we do not agree that legislating to add more forms and administration to the process of choosing is the right way to achieve this. Following the noble Lord's discussion with Legal and General, I should be happy to engage with him and Legal and General to elicit any views that it may have, even if it is not particularly wedded to this approach. We have a shared objective, but I am not convinced that this prescription is the right way to go.

Lord Oakeshott of Seagrove Bay: My Lords, this has been a useful and thoughtful debate. However, I was rather confused by the contribution of the noble Lord, Lord Skelmersdale, which seemed in essence to boil down to saying that people do not need advice at all. The measure does not suggest that people do anything different or that insurance companies offer different options. It is not a question of moving or not moving. I do not think that insurance companies would be fooled by people moving at the age of 65 or stopping smoking. We are not talking about that but about how we ensure that vulnerable people get the right advice. Not for the first time today, I think that the noble Lord, Lord Skelmersdale, and I are not communicating properly, which may be my fault as much as anyone else's.
	The contributions of the noble Baronesses, Lady Hollis and Lady O'Neill, were very helpful. I agree with the noble Baroness, Lady O'Neill, that a supply-side solution is much the best. I am not in favour of any more legislation or prescription than one has to have. Part of this process, and of trying to get publicity for the points we are making, is to put pressure on the industry to get its own house in order, and to encourage the FSA to focus a little more directly on these issues. I take the Minister's point that the measure is probably a little too prescriptive. However, in some ways this is reminiscent of the debate we had on generic advice. I am delighted that some people are using an online tool, and that the feedback is positive. However, the problem arises with the people who are not using the online tool and who do things automatically. We are not getting through to those people. That is why I am trying to highlight this problem. There is a sloping playing field, particularly as regards some of the smaller insurance companies, which may be less scrupulous or less well informed about annuity options. There is a wide range of insurance companies in this country. Some companies such as Legal and General at the top of the tree are completely transparent—it is in their interest to have the most level playing field possible for everybody—while some smaller ones are, frankly, not as good as regards consumer protection. That is what I am trying to highlight. As I say, I thank all noble Lords for their contributions, which I hope will be noted by the people who need to make changes. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Oakeshott of Seagrove Bay: moved Amendment No. 77:
	Before Clause 123, insert the following new Clause—
	"Amendment of rules to take pension annuities by the age of 75
	(1) Any statutory provision or rule of law requiring a pension to be taken in the form of an annuity by the age of 75 is amended so that the age limit is 85.
	(2) The Secretary of State must review the age limit no less frequently than every five years and report on the average life expectancy."

Lord Oakeshott of Seagrove Bay: My Lords, this is the second bite of the cherry as we debated this matter earlier today. Therefore, I do not propose to cover all the same ground again. As I said, many of the arguments supporting this amendment and Amendment No. 77A, in the name of the noble Lord, Lord Fowler, are about tactics on the best way of relaxing the rules applying to the purchase of annuities, which I think most noble Lords regard as onerous. However, the important thing is to get a worthwhile increase in the age of compulsory annuitisation. If the noble Lord, Lord Fowler, decides to press his amendment on the 80 age limit, I shall be happy to go along with that. It is right to have a compulsory limit for annuitisation, but it was fixed at 75 a generation ago in the mid-1970s. Since that time life expectancy has risen by slightly more than eight years. Therefore, even if one accepts that it was right to fix it at that age at that time, it should be raised to at least 80, if not to 85. My amendment seeks to raise the relevant age and proposes that it should be reviewed every five years so that we do not have to wait another 30 years before it changes.
	Given the substantial falls in the market in recent months—the noble Lord, Lord McKenzie, said that not everyone's pension fund is fully invested in equities, but corporate bonds, in which many are also invested, have also taken a tumble—it is highly unlikely that those losses will be regained for several years to come. As regards giving practical help to people in this situation, a minimum of a five year, or preferably a 10 year, increase in the annuity age would enable advisers to offer proper planning and would provide a reasonable period for the long-term market to reassert itself. In this country equities have always produced good returns over long periods, but losses cannot be recouped in a short time.
	I accept the basic present structure—I think we all agree that the Government are not likely to give way on that—but consider that, given the present crisis, we should move to an age limit which allows for a reasonable period during which pension funds can be rebuilt. Given the large increase in life expectancy over the past 30 years, we should accept the logic of moving, preferably, to a limit of 85, although I would accept one at 80. I beg to move.

Lord Fowler: My Lords, my Amendment No. 77A is grouped with Amendment No. 77. I shall not add much to what I have said. I have already made two speeches on annuities this afternoon, and I think that by now everyone has a clear idea of where I stand on them. I want the total abolition of compulsory annuities. Indeed, the Minister's suggestion that alternatively secured pensions are the way forward has rather torpedoed his own case in that respect. However, we shall have to see about that.
	In wanting compulsory annuities to be abolished, I differ from the Liberal Democrats, who do not want them to be abolished, but want the age limit to be extended. There is no question that there is a financial crisis and there is no point in repeating the detail of it. However, given that crisis, I seek a compromise and the provision of help to people reaching 75. However, the compromise has been rejected and the help is not forthcoming. The noble Lord, Lord Oakeshott, said that one of his objections to my proposal for suspending the annuity rule was that his proposal for an 85 age limit was the only answer. We shall see what the Government say. Frankly, I doubt very much that they will give ground. I do not know whether anyone on the Liberal Democrat Benches thinks that the Government will announce a sudden conversion to the 85 age limit for annuities. If anyone thinks that, they are living in a fool's paradise. The Liberal Democrats voted solidly against my proposal and consequently we missed an opportunity to change the situation for the better, and the losers—

Lord Oakeshott of Seagrove Bay: My Lords, if the noble Lord will allow me, what is his basis for saying that he thinks the Government would not possibly accept an increase in the age limit but that they would accept a temporary amendment? Why would they accept one and not the other?

Lord Fowler: My Lords, I am not saying that. The Government will not accept either. I hate to teach the noble Lord his business, but the point is that we could have defeated the Government this afternoon, but we cannot defeat them now. I guarantee to the noble Lord that we will not defeat them now, because of the time and because of all the points that anyone with any sense knows about this House. If the noble Lord thinks that we are going to defeat them now, he is living in a fool's paradise. We should not have arguments about such basic politics.
	The losers on this are going to be people in their 70s. I much regret that, and it is on the conscience of the Liberal Democrats that they have done that. The noble Lord, Lord Oakeshott, referred to tactics. I fear that his tactics this afternoon have not been very bright and the losers are a number of pensioners and people coming up to pension age. I very much regret that.

Baroness Greengross: My Lords, I support the amendment. I hope that the Government and the Minister will agree to reconsider this in the light of what has been said by the noble Lord, Lord Oakeshott, about increased longevity, which I think the Government and most people in this country underestimate. The change is phenomenal. Since the rules were brought into play, there has been an enormous change in life expectancy. We now have legislation encouraging older people to stay on at work. We have a great deal of encouragement for flexibility in work, in retirement and in increased activity to a much older age than we could have imagined in 1976 or 1986.
	In the light of that, it is absolutely essential that the age at which you need to convert savings into an annuity should be looked at again, I hope to as high an age as possible, or removed. It is high time that the Government took these proposals seriously in the spirit in which they are intended. Please look again and see whether something can be done.

Lord MacGregor of Pulham Market: My Lords, I very much regret that I was not able to be present for the earlier debate, owing to a long-standing lunchtime engagement that I had in Norfolk. I would certainly have strongly supported my noble friend Lord Fowler in his proposal.
	This proposal is obviously second best, but I wish to support it on the obvious ground of longevity, which the noble Lord, Lord Oakeshott, and the noble Baroness have just mentioned. Clearly, this is changing the whole scene for pension funds in so many ways. There is also another point—if this was raised in the earlier debate, I apologise for repeating it. The Bill is supposed to be about some further encouragement for everyone in pension provision. People have had so much discouragement already with company pension schemes, final salary schemes diminishing and so on. I can think of very few things more likely to discourage them than in the next two years to have a whole crop of media stories about people who had expected to have a pension beyond the age of 75, based on the kind of equity levels that we have had until recent years, who discover that there will be a massive reduction in the pension that they can get from the annuity after the age of 75. That is if the noble Lord, Lord Oakeshott, is right, and I suspect he is, that there will not be a big improvement in the equity situation in the next two or three years. That applies in particular to people over the age of 72 and approaching 75 now. One can just imagine the sob stories that there will be every weekend in the papers about that sort of thing. I ask the Government to look at it again, because it will be yet another discouragement among the many that there have been for people voluntarily to make greater contributions to their pensions themselves.

Lord Howarth of Newport: My Lords, the noble Lord, Lord MacGregor of Pulham Market, has just made a powerful speech adding to the arguments that were put forward in the earlier debate, and I certainly do not intend to repeat any of them. I simply say to the Minister that there will be a not insignificant number of people who, under the present dispensation, will face an appalling crisis in their personal lives. I really hope that the Government will take this away and think very carefully, sympathetically and constructively about the inadequacy of the present dispensation and see what they can do.

Lord Skelmersdale: My Lords, following on from that point, surely the same happens at whatever age you decide to annuitise; whether 80, 85 or 90. The crunch point can come at any point. The Minister said that, although not quite in those terms, on the last "abolition of annuitising" amendment. You just do not know whether it will come at a particular point for you. It is inevitable that annuity rates and the value of pension pots will vary over time. Who is then to say that annuitisation at any particular age will be appropriate for a particular individual, or even in general? It is only if you believe, and I have said that I do not, that there should be an age by which you have to annuitise your pension pot that you can argue for or against a particular age. I am not in that position, seductive though it might be—it clearly is on both sides of the House—to some noble Lords.
	I do not know whether it will be of any comfort to those noble Lords, but in all the discussions that we have had I have never heard anyone say that 75 is 10 years after the current state pension age. Only the Minister can tell us whether that was the Treasury's original intention. If so, do the Government intend to compound their error of keeping to a specific age when state pension age for men and women increases to 66 in 2024, 67 in 2034 and 68 in 2044? Each rise will be phased in over two years. In other words, do the Government intend as a long-term expedient to have compulsory annuities when people are 76, 77 or 78? Perhaps the noble Lord could help the House by telling us.

Lord McKenzie of Luton: My Lords, this has been a shorter debate, and I seek not to reiterate all the points that I made when discussing the proposed temporary suspension of the age 75 "annuitisation requirement".
	I say to the noble Baroness, Lady Greengross, that of course the Government keep this under review, and we will continue to do so, although we are not in a position tonight to accept either of the amendments in this group. It is interesting that there is a difference of view. The noble Lords, Lord Fowler and Lord Skelmersdale, said that they did not want any age by which you have to annuitise. I am not sure whether that translated to them not wanting any age at all at which some form of crystallisation of income stream must take place. If that is their proposition, they have not said anything about the inheritance tax consequences.

Lord Skelmersdale: My Lords, the noble Lord has misunderstood that part of the argument. No one is suggesting that annuities should be made illegal. Of course, annuities will continue in one form or another. What the noble Lord, Lord Fowler, I hope, and I have sought to persuade the House of is the abolition of compulsion.

Lord McKenzie of Luton: My Lords, I understood that point, but if there is no requirement to crystallise some form of income flow from the pension pot at any stage, that raises the question of what happens to the pension pot on death. Is that going to lead to some tax-free inheritance proposal? That would be what happens if someone should, sadly, die before they reach the age of 75 at the moment. The noble Lords need to address those issues as well, as to whether they would see any arrangements under which they propose that the pot should be converted to some form of income flow, which is the key purpose of the tax regime. The noble Lord looks as though he wants to have another go.

Lord Skelmersdale: My Lords, I would love to. Both last year and this year, the amendments in question have taken it on board that the tax regime would change. It is for the Government to produce the tax regime, not the Opposition.

Lord McKenzie of Luton: My Lords, it is interesting if that is implicit, or perhaps now explicit, in the Opposition's proposal. It certainly was not so in relation to the RRIF, which is one variation of achieving what the noble Lords want. More specifically on the amendments, I will go over the issues around tax relief, because pension savings receive significant tax relief—some £18.9 billion in 2007-08. By the time an individual retires, it is very possible that well over half their fund may be made up of tax relief. In exchange for this, it is not unreasonable that pension savings are used to provide an income in retirement. Tax relief is given so that people do not have to fall back on means-tested benefits and to encourage pensioners to save for a reasonable income in later life. Increasing the age at which income must be paid would mean that a minority of people would be able to use tax-relief pension savings to benefit their heirs, at a cost to the Exchequer. That would devalue the reason for which tax relief is given.
	Amendments Nos. 77 and 77A would increase the age at which an individual must begin to receive a retirement income. I stress that that is not compulsory annuitisation. I can appreciate that having an age-related requirement raises questions about its continuing applicability over time. However, I assure the House that the Government are committed to monitoring the available evidence around this requirement.
	While it is an undeniable fact that general longevity has been increasing, the latest evidence available shows that at present only 5 per cent of people have taken a retirement income after the age of 70. For 19 out of 20 people, taking a secure income from pension savings happens by the age of 70; they do not even wait until 75. Moreover, despite increasing longevity, evidence shows there has been little change to the age of retirement. In fact, figures from the Office for National Statistics show that the average retirement age has increased by about only one year since 1984. Therefore there is no "cliff edge" at 75 for the majority of people. They generally take the income from their pension savings when they need it—when they retire in their early or mid-60s.
	On the question of why the age of 75 continues to be appropriate, there is the issue of the age at which most people retire. The average retirement age is 63.8 years. Before the age of 70, most people have already started to take an income from their pension savings. There is also the impact of the effects of mortality pooling, which means that the return required for other investments to match the return on annuities becomes unrealistic when one reaches the age of about 75.
	Overall, the evidence suggests that raising the age would be of no benefit to the vast majority of people who use their pension savings for the intended purpose—providing an income in retirement. Those with other sources of income who wish to leave their pension invested can do so through an alternatively secured pension. Therefore it would seem that such changes would benefit only those who seek to delay securing an income in an attempt to avoid tax charges on death. This is neither the purpose nor the intention of pension savings, and that would be of benefit only to those who had no need of their pension savings to provide an income in retirement.
	As I said, we are committed to monitoring the available evidence and will consider a review of the age limit if that appears justified. That is the commitment I can give, but I cannot go beyond that. On that basis, I hope that noble Lords will not press their amendments.

Lord Oakeshott of Seagrove Bay: My Lords, that response was disappointing and I am bound to say that I did not see the significance of the arguments that the Minister used at the end of his speech— that most people have already started taking the income before the age of 75 and that that is their choice. However, that is not the reason for saying that 75 is the right age for compulsory annuitisation. Secondly, he said that because returns are unrealistic for people beyond the age of 75, it was right therefore for annuitisation to be compulsory. The whole point is that if people do not like the returns, they will obviously not take them; however, I do not see why that is an argument that 75 is the right age.
	I thank noble Lords who have spoken, particularly those who supported the amendment, including the noble Baroness, Lady Greengross, and the noble Lords, Lord MacGregor and Lord Howarth. I should say to the noble Lord, Lord Fowler, in clarification of the substance of my argument, that I tried to reach compromise on an amendment on which the Government could have been beaten. I congratulate him on his ingenuity in working his temporary amendment—if I may refer to it that way—into the Bill rather earlier than otherwise would have been the case. I should be clear that we on these Benches were happy to combine and support the amendment of the noble Lord, Lord Fowler, on an age limit of 80. The Question would have been put in prime time if the Conservatives had not chosen, for their own reasons, to move another amendment, which they perfectly well knew we would not support. Let us not have any nonsense about whether the Government could or could not have been beaten today. They could have been beaten on the amendment of the noble Lord, Lord Fowler, which we were happy to support, to raise the age to 80—which we are now talking about. Let us not have any disinformation on that point. We were quite happy to give our support; we offered to do that and were rejected.
	Let me make it clear that we do not support a temporary change because that would be completely unworkable; I am unaware of any serious pension provider or anyone else who has examined such a proposal and said that it would work. It would create more uncertainty and instability in a very unstable situation. That is why we were unable to support such a proposal, but we believe that the age of compulsory annuitisation should be raised. Ideally, we would like it to be raised to 85 and we wish to test the opinion of the House.

On Question, Whether the said amendment (No. 77) shall be agreed to?
	Their Lordships divided: Contents, 46; Not-Contents, 99.

Resolved in the negative, and amendment disagreed to accordingly.

Lord Fowler: moved Amendment No. 77A:
	Before Clause 123, insert the following new Clause—
	"Amendment of pensions annuities rule
	Any statutory provision or rule of law requiring a pension to be taken in the form of an annuity by the age of 75 is amended so that the age limit is 80."

Lord Fowler: My Lords, I shall be very brief because I think we all know where we now stand on annuities. As I said, my preferred option was the suspension of the compulsory annuity rule. The Government voted that down with the help of the Liberal Democrats and I deeply regret that. We missed an opportunity to change the pension position of this country and I think that we will live to regret it.
	However, raising the age limit to 80 is an option. Given the result of the Division that we have just had, I am not unbelievably optimistic but I think that it is a better option than an age limit of 85. It has some of the characteristics of the suspension; it would serve the interests of people who are coming up to the age where they take an annuity; and I think it would protect their interests. I therefore commend the proposal to the House. I beg to move.

On Question, Whether the said Motion (No. 77A) shall be agreed to?
	Their Lordships divided: Contents, 50; Not-Contents, 89.

Resolved in the negative, and Motion disagreed to accordingly.

Lord Skelmersdale: moved Amendment No. 77B:
	Before Clause 123, insert the following new Clause—
	"Disclosure in the public interest
	In section 87 of the Pensions Act 2004 (c. 35) (other permitted disclosures), insert at the end of subsection (2)—
	"(i) if, and to the extent that, having regard to the rights, freedoms and legitimate interests of any person, the disclosure is necessary in the public interest."

Lord Skelmersdale: My Lords, this is a slightly strange amendment for the Bill. Over the summer, my eye was caught by an article that appeared in Professional Pensions headed:
	"TPR removes authority for 29 schemes from GP Noble".
	The article stated that the schemes were under the control of Nottingham-based GP Noble, but are now under the trusteeship of Independent Trustee Services. Official Pensions Regulator documents confirm this fact.
	A spokeswoman for the regulator quite rightly declined to comment on individual cases, as this is restricted information under the Pensions Act 2004. That is a correct interpretation of Section 82 of the Act, which makes it quite clear that restricted information must not be disclosed,
	"by the Regulator, or ... by any person who receives the information directly or indirectly from the Regulator".
	However, although disclosures are allowed under Sections 84 to 87, nowhere, as far as I can see, does the Act say that, if the press discovers that the regulator is working on a case or has decided to pursue a particular course of action, that information is restricted.
	The regulator took exception to the article to which I referred and threatened to take the journalist who wrote it to court, which could have resulted at best in a fine up to the statutory maximum or at worst in a fine plus imprisonment for up to two years under Section 82(5). Furthermore, he ordered her to reveal the sources of her story, something that journalists never do and are frequently protected in law against, not least in Section 59 of the Data Protection Act, from which the amendment is copied.
	Through its lawyers, Professional Pensions contested this rather high-handed approach by the regulator, saying that the article did not contain,
	"any information obtained by the Regulator in the exercise of its functions which relates to the business or other affairs of any person".
	That is identical to the words found in Section 82(4) of the 2004 Act. As far as I know, the regulator then calmed down, although I have no knowledge about whether he intends to pursue the case. I hope that the Minister will tell us that he has backed down completely.
	I contend that, had the Pensions Act been clearer in what it would and would not allow, this spat between the publication and the regulator, which no doubt cost Professional Pensions and maybe the journalist concerned a considerable sum of money, would never have happened. I believe that the press should be able to publish information that it discovers as long as the information does not come from the regulator's office. This amendment seeks to achieve that. I beg to move.

Lord McKenzie of Luton: My Lords, I am not sure that I have a complete answer to the noble Lord's amendment, but I will have a go with what I have and follow up if necessary.
	I start by reminding noble Lords that there are already several mechanisms in place for disclosing information in the public interest. For example, Section 89 of the 2004 Act gives the regulator the power to publish reports of its consideration of any particular matter where it considers it appropriate to do so. The public interest is one of the factors that the regulator bears in mind when deciding whether publication is appropriate. The form, manner and timing of that report are matters for the regulator. In carrying out its functions, the regulator is the recipient of a considerable amount of sensitive information, much of it commercial in nature and provided in confidence.
	The noble Lord's amendment would allow the regulator to disclose restricted information that it deemed in the public interest, having had,
	"regard to the rights, freedoms and legitimate interests of any person".
	This would clearly lend itself to a wide interpretation and views on how it should be read would differ considerably. As a result, the regulator could be placed under pressure to disclose restricted information where it was inappropriate or premature to do so. It would be very difficult for the regulator to carry out its functions if providers of information could not be certain that the information would not be made public. Stakeholders would become reluctant to disclose commercial information in confidence to the regulator. That is a particularly valid concern where the regulator is involved in an ongoing investigation or considering a particular transaction. I believe that it is sensible to allow the regulator to conduct its business free of such pressures and to leave it to report at the appropriate time, which, in most cases, would be at the conclusion of its investigations.
	On the specific case, GP Noble is, as noble Lords will be aware, a firm of independent trustees that is currently under investigation by the regulator and the Serious Fraud Office, among others. I will endeavour to be as helpful as I can on this, although I am sure that the noble Lord will appreciate that I would not wish to prejudice the outcome of those investigations.
	On 18 August this year, Professional Pensions magazine published a news story revealing that the Pensions Regulator had appointed Independent Trustee Services Limited as trustee to 29 schemes for which GP Noble had previously been the trustee. The article included details that were not previously in the public domain and that the regulator considered to be "restricted information" under Section 82 of the Pensions Act 2004. Under that section, it is an offence for the regulator or for anyone who has obtained restricted information directly or indirectly from the regulator to disclose it other than in the circumstances set out in the Act. On 22 August, the Serious Fraud Office confirmed that it had arrested three men as part of an ongoing investigation into GP Noble.
	I believe that this highlights the importance of handling such sensitive data appropriately and that it is right and proper that personal and confidential information held by the regulator should be protected carefully. As I said, I believe that it is sensible to allow the regulator to conduct its business free of the pressures that the amendment could impose and to leave it to report at the appropriate time. I hope that that explanation is sufficient for the noble Lord. If he thinks that I could provide further information, I should be happy to try to do so.

Lord Skelmersdale: My Lords, I admit that I was speaking even faster than I usually do, so perhaps the Minister did not quite understand what I was getting at. He and I have both related the incident behind the regulator's complaint. He relied on Section 89 of the Act, which I looked up while he was speaking, but that has nothing to do with the press, me, the Minister or anyone else; it concerns solely the regulator. The question here is what happens when, without reference to the regulator, an outside body—be it a member of the press, one of your Lordships or whoever—finds out what the regulator is doing and publishes that information. There seems to be no direction in the 2004 Act to cover that situation. In those circumstances, I will certainly take up the Minister's offer of a meeting, with or without an exchange of letters, because we need to get to the bottom of this point.

Lord McKenzie of Luton: My Lords, perhaps the noble Lord will permit me to reiterate what I said. Under Section 82, it is an offence for the regulator or anyone who has obtained restricted information directly or indirectly from the regulator to disclose it other than in the circumstances set out. Therefore, someone disclosing information that they had received directly or indirectly would be acting outside the Act. However, I can see that that has not dealt with the issue about which the noble Lord is concerned, which I will take up separately.

Lord Skelmersdale: My Lords, this information did not come from the regulator or from anyone connected with the regulator, as I am told by Professional Pensions. However, we are not going to get any further tonight. I will certainly accept the Minister's offer of further discussion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Thornton: My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, I suggest that Report begins again not before 8.40 pm.

Moved accordingly, and, on Question, Motion agreed to.

Mental Health Act 2007 (Consequential Amendments) Order 2008

Baroness Thornton: rose to move, That the draft order laid before the House on 7 July be approved.

Baroness Thornton: My Lords, you will recall that the Mental Health Act 2007 received Royal Assent on 19 July last year. This evening we have to consider a straightforward order that makes a number of amendments to legislation as a result of the implementation of the changes that the Mental Health Act 2007 makes to the Mental Health Act 1983 on 3 November this year.
	One of the main changes made by the 2007 Act was to introduce a new, simplified definition of mental disorder. That removes the unnecessary and sometimes unhelpful distinctions between different categories of mental disorder. In future, the powers in the Act will apply to all mental disorders, regardless of the legal label attached to them. This gives rise to the amendments at Articles 4, 5, 6, 8 and 10 of the order.
	Another difference will be the increase in the number of professions from which people can be drawn to perform the role of approved social worker. The former will now be approved mental health professionals—AMHPs—who will be drawn from nurses, occupational therapists and clinical psychologists as well as social workers. Articles 3 and 20 of the order are required as a consequence.
	Articles 17(b), 18(b) and 19(b), together with Articles 11 to 14, reflect the abolition of after-care under supervision. They take effect on the later date of 4 May next year because the provisions they abolish remain in force until the end of the transitional period for people who are currently on after-care under supervision. I note in passing that that period was extended from three to six months in response to comments from key stakeholders on the consultation version of the secondary legislation.
	Articles 17(a), 18(a) and 19(a) insert references to supervised community treatment—SCT—into three sets of regulations about direct payments. This preserves their effect in relation to patients who come under the 1983 Act while living in the community given that the current references to after-care under supervision are being removed.
	Article 7 provides that the Mental Health Act Commission takes on an additional function in respect of patients on supervised community treatment. Articles 9 and 15 are simply tidying-up measures. Article 9 revokes some redundant regulations about after-care under supervision in relation to Scotland.Article 15 revokes an old order which amended the Mental Health Act 1983 in 2001 to put right an incompatibility with the European Convention on Human Rights in respect of the powers of the Mental Health Review Tribunal.
	That leaves Article 16, which amends the Private and Voluntary Health Care (England) Regulations 2001. These refer to the current Mental Health (Hospital, Guardianship and Consent to Treatment) Regulations 1983 which will be replaced by the Mental Health (Hospital, Guardianship and Treatment) (England) Regulations 2008.
	None of the main changes that the 2007 Act brings in on 3 November gives rise to any need for consequential amendments. Similarly, we do not expect to need to amend any other legislation as a consequence of either of the two further measures that we are introducing at later dates. We are on course to introduce the statutory services of independent mental health advocates—IMHAs—in April next year, and our plans are still on track to implement the requirement for hospitals to ensure that patients aged under 18 admitted for mental health treatment are accommodated in an age-appropriate environment (subject to their needs) in April 2010.
	On this basis, I hope that your Lordships' House will approve the order. I beg to move.

Moved, That the order laid before the House on 7 July be approved. 26th Report from the Joint Committee on Statutory Instruments.—(Baroness Thornton.)

Earl Howe: My Lords, I should first of all like to thank the Minister for introducing the order in her customary clear and helpful way. Much of its substance is non-contentious and consequential on the 2007 Act, and I do not propose to detain the House by referring to each and every provision.
	There are, however, some associated issues, which I hope the Minister will not mind if I raise. The first relates to advocacy. When the 2007 Act went through this House there was strong cross-party support for including a right to an independent advocate for anyone who found himself subject to compulsory detention and treatment. Many of the voluntary sector organisations specialising in mental health reconciled themselves to some of the more difficult provisions in the Act in the knowledge that commitments on advocacy had been made by Ministers. There is, however, an emerging worry that the measures necessary to enable commissioners to prepare for the introduction of independent mental health advocates are not in place, resulting in people with a legal right to an IMHA from April being unable to access one.
	What measures are needed? There are perhaps four. The first is commissioning guidance. I should be glad if the Minister could say what progress the department has made in preparing guidance for commissioners, following the example set by Wales. While some good commissioners have taken the initiative on this, I understand that many others will not be building IMHA provision into their 2009-10 plans. There have been signs that the department will not be in a position to publish guidance by the end of this year, which is worrying.
	The second measure is effective training. Training with mandatory qualifications was another important element to IMHA development, but again there are signs that it has been allowed to slip. That cannot be satisfactory. A trained and qualified workforce should be seen as a priority, and momentum is absolutely key to the full rollout of such training. The third issue relates to the relationship between advocacy and community treatment orders. There are strong concerns about community treatment orders being introduced several months before the introduction of the legal right to an IMHA. It would be extremely helpful if the Minister could clarify how the transition period is managed to ensure that service users are fully protected.
	The final issue is to do with money. No budget announcement about advocacy has yet been made, and I am afraid that this has further contributed to the confusion that exists in the field and to the fact that planning at a local level has been limited. When will an announcement be made on this? Apart from advocacy, the other issue of critical importance to patients and families is access to information. Information needs to be both adequate and appropriate. While the care services improvement partnership has put some fairly minimalist leaflets on its website covering several of the key legal issues, there is no obligation on trusts to make these available to service users, or indeed families and carers. Also the leaflets are not themselves adequate to provide the kind of information that a person, including a member of the public, might need.
	Secondly, the statutory information leaflets that are required to be given to patients are not at all helpful. Their language is almost incomprehensible. Patients in this situation are likely to be frightened and on medication. They will also be ill and may have a learning disability. I feel very strongly that these forms should be made available as a simple guide at an appropriate level of literacy so that they can be readily understood. In practice, a nurse or other staff member will sit down with the patient to explain the contents but this may not happen properly and, in any event, it is not in itself enough. People should have ready access to information at all stages so that they become less fearful and more able to talk to staff. Good information aids effective communication with staff and helps them to reach together a better way forward. The 2007 Act introduces a major new regime in CTOs as well as new professional roles, and everything needs to be done to help vulnerable patients to feel secure in this new regime.
	Finally, I raise a practical issue—readiness for the 3 November deadline. The Royal College of Psychiatrists tells me that it is concerned that the new detention forms are not yet available and that an insufficient number are being sent to hospitals. Will the Minister look into that urgently? It would be better if the forms were available on the website and could be downloaded as PDF files, instead of having to be ordered and paid for as paper copies when, in all probability, there will not be enough of them anyway.
	In advance of the Act commencing, the forms need to be sent out or otherwise made available to practitioners who may be involved in sectioning patients. We must all hope that, as the provisions of the Act come into force, practitioners administer it in a way that ensures the maximum dignity and autonomy for patients. Some of us fear that defensive practice may kick in and that the Act may be applied in ways that may not be in the best interests of patients and others. We hope that CTOs will be used only as intended, and that they will not lead to a rise in the overall use of coercion in the care and treatment of those with mental illness. If that were to happen, the consequences in increased stigma and discrimination against mental health patients would undoubtedly be damaging.

Lord Williamson of Horton: My Lords, I am a Member of your Lordships' House who lived life to the full through the whole passage of the Mental Health Act 2007 and the various consultations and pre-legislative discussion that preceded it. Your Lordships will recall that at one stage it was expected that there would be a completely new and self-contained mental health Act but, in the end, the Government opted for an Act that is not self-contained but, none the less, makes important amendments to the Mental Health Act 1983 and other Acts.
	I did not have strong views on that point because I found that we were able to make substantive amendments in the form of new additions to the 1983 Act. An example is Section 31 of the Mental Health Act 2007, adding a new Section 131A to the Mental Health Act 1983 on age-appropriate accommodation for children.
	In the 2007 Act, we achieved points of substance, but I welcome the order tonight, which is, as far as I can see, wholly consequential and technical, because I attach importance to completing everything that we set out to achieve in the 2007 Act. This is part of that programme. I would also welcome hearing the Minister's comments on the points raised by the noble Earl, Lord Howe, on some of the substantive matters.

Lord Alderdice: My Lords, as the noble Lord, Lord Williamson of Horton, said, the order is not particularly contentious; it is, as its name implies, consequential. However, it would be wrong to allow the opportunity to pass without pointing out one or two important issues referred to in the order, although not dependent on it, and one or two things that are not in the order but which are raised by it.
	First, as the noble Baroness pointed out, we have the removal from the Act of the terms, "impairment", "severe mental impairment", "psychopathic disorder" and "mental illness" and the substitute of the term "disorder". I do not know whether legally that makes an enormous difference, but I fear that it tends towards imprecision in people's understanding of what they are dealing with.
	There is a fundamental difference between a person who, because of damage or disturbance at or before birth, is permanently incapacitated in their functioning mentally and emotionally in a way that is not repairable for their lifetime and a person who, for example, in their later teenage years, begins to show traits which they then continue to exhibit over the rest of their life, which we could call a disturbance of personality. That is, in turn, completely different from the acute disturbance where someone who has previously been well falls ill. That may be transient—for a few days; it may be relapsing; it may be chronic; it may be profoundly severe; it may affect the personality much more profoundly in the case of a psychosis than in the case of a neurosis.
	Those are differences and if by substituting the single term "disorder" we are encouraging people to ignore the differences between those things or to think them unimportant, we are not doing anyone a great favour. We will find that in 20 or so years' time, people will come back to change the provision. Those are important differences, not just from the point of view of treatment but legally, because they make for a very different legal issue—so different that in the Northern Ireland Act in the early 1960s, the notion of personality disorder being included was unacceptable. Northern Ireland legislation was quite different from legislation on this side of the water because of a different view. I do not think that psychiatrists in Northern Ireland ever regretted that difference.
	Although moving to a single term may be unobjectionable, I have substantial reservations about it. I rather think that we will live to regret it and those of us who live long enough will live to see it changed.
	The second issue referred to by the noble Baroness is the replacement of "approved social workers" with "approved mental health professionals". There are substantial potential benefits in that change, in that it opens the opportunity for a wider number of professionals to be involved in some important decisions, but we must not forget why social workers were specified in the first place. The reason was that we wanted a professional who would not only understand the disturbance of the individual but have a sense of their social background. The person was meant to be there in loco of their relation. The wife, husband, mother or father was unable to be there for whatever reason, so the social worker was there as someone who understood not only mental illness and the illness of the person involved but the family and the family context.
	If we are now to have a range of professionals involved, many of them in their practical training will not necessarily have the same appreciation of those issues as social workers in their training. I know that training is being put in place for that, but we need to understand that this is not a part of the core professional training of some people who will be involved. That needs to be kept in mind. When we move further down the line to regulation of others, such as psychotherapists, there is no reason why they should not be included in this list, but the same problem will arise. We need to pay attention to that.
	The noble Earl, Lord Howe, also referred to the question of independent mental health advocates. That was a very important development. Noble Lords will all recall the serious discussion about problems of consent and compulsion in relation to treatment—especially, but not exclusively, community treatment orders. There was a general sense—not entirely erroneous, I think—that some of the pressure for the legislation that came before us came not from the health department but from another department where the issue was about justice and order in the community. Therefore, there was felt to be a very strong need to have independent mental health advocates. Why? Because those who are mentally ill are vulnerable and often need someone who can speak on their behalf, someone who is not detained, someone outside who has the freedom to access information.
	It is a little disturbing that we find that the compulsory elements in the community treatment orders and other legal matters are coming into place shortly, but advocacy is left to the side in commissioning guidance, effective training, budget allocations and the whole question of the relationship to CTOs. It is not unreasonable for us to seek some assurance from the Minister that that will all be attended to. Otherwise, we will have to come back in some other context to press the issue.
	It is entirely possible that the community treatment orders will be dealt with in a fashion that is helpful to patients and professionals and reassures families. The noble Earl referred to his confidence that nursing staff, when the patients are in hospital, or other staff, when the patients are outside hospital, will manage to conduct the legal form in such a way that the patients will be looked after properly, humanely and thoughtfully and not compelled inappropriately. I do not wholly share that confidence, not because I believe there to be a lack of professionalism or because I lack confidence in the integrity of my professional colleagues in psychiatry, medicine, nursing, social work and psychology, but because I am very aware as a practising psychiatrist of the pressures under which all these healthcare professionals are working. Those pressures are substantial and are not diminishing. Nor will they diminish in the next while, and I fear that they will encourage people to take short cuts and to allow the rather compulsory component inherent in the legislation to take pride of place.
	The noble Earl speaks about the nurse explaining everything to the patient. Of course that is what the nurse wants to do. Indeed, the nurse tries desperately to create the space in which to do it. However, when there is a shortage of staff and staff sickness, and agency staff are in—all the sorts of pressures that are the reality of mental health in-patient care—it is not so easy to be optimistic that it will be done in quite that way.
	Finally, the availability of the form was mentioned. It is not unreasonable that forms and information of various kinds should be readily available on the internet. This is not the kind of form that is likely to be abused or misused. There is no real reason why it should not be readily available. I can see many a junior doctor or other professional trying to get a form at 12 o'clock at night. Rather than scrabbling through filing cabinets and drawers to find out where the last one was put and finding that the secretary to the ward, if such a thing existed, had not replaced the last form that was used, they can just get on to the internet and download and print the form. I see no reason why they should not immediately be made available and accessible on the internet, with all the other kinds of information that were mentioned earlier.
	I applaud the Government for trying to ensure that more and more governmental information is available on the internet and that there are more and more opportunities for healthcare staff to use the internet. This is laudable, but here is an opportunity to put this into place. If patients could see what is on the forms, what would be wrong with that? Families could see what the form looks like and what information is asked for. There is no disadvantage in that. It is transparent and open, which is only to be welcomed.

Baroness Thornton: My Lords, I am grateful for the thoughtful contributions to this debate. I know that many noble Lords have strong views on mental health and a great deal of expertise in it. I shall pick up some of the key points that were made.
	The noble Earl talked about three issues: advocacy, information and the forms. The decision was taken to bring the provisions on IMHA services in England into force in April 2009 because of the need to develop suitable training and commissioning arrangements for those services. That is still the case. Although there is no statutory requirement for services to provide independent mental health advocacy support before April 2009, advocacy provision is already available on a non-statutory basis from a number of agencies, and we expect these arrangements to continue.
	The noble Earl also asked whether there will be additional funding for advocacy. We are committed to funding independent mental health advocacy, and funding for this, together with commissioning arrangements, will be announced later this year.
	On the delay in announcing funding and commissioning arrangements for the services, we have publicly said that these services will be introduced in England in April 2009, and that is still the case. The commissioning arrangements will be announced shortly, and to support the process, comprehensive guidance for commissioners will also be published shortly.
	The noble Earl asked whether primary care trusts or local authorities will commission the services and why there has been no announcement. We consulted on this. Different people have different views on who should commission IMHA services, so we want to ensure a system that offers maximum flexibility but delivers a high-quality service. We will announce our conclusion about those arrangements at the same time, so the announcement will be part of the same package.
	The noble Earl and the noble Lord, Lord Alderdice, talked about supervised community treatment. We see this as an improvement to after-care under supervision, and we see no reason to delay its implementation on account of the need to take longer to prepare for the introduction of advocacy.
	Clearly, IMHAs have to have appropriate training and experience. This will be set in regulations, and we are developing training materials for precisely this purpose. I will confirm the timetable for that later, as I am not absolutely certain at the moment.
	Both noble Lords talked about information, which is extremely important for patients and their families. Section 132 of the Act places a duty on hospital managers to provide information to patients both orally and in writing. To help them, the department has provided updated leaflets, which are also on the Department of Health website. Although the use of those leaflets is optional and managers' own materials can be developed, the materials are there and there is a duty on managers to provide them.
	I undertake to look into the availability of the forms, as that is clearly very important, but the information that I have at the moment suggests that the forms have to be purchased. The contractors have assured us that they will be dispatched and that there is no need for panic ordering.
	I thank the noble Lord, Lord Williamson, for his kind remarks and for the work that he did, among others, during the passage of the Bill.
	I will resist the temptation at this stage to reopen some of the issues to which the noble Lord, Lord Alderdice, referred in his broader comments, such as the definitions and approved mental health professionals, partly because of the time, partly because noble Lords here are significantly more experienced in these matters than I am, and partly because, as the noble Lord, Lord Williamson, said, it is probably not appropriate to reopen all those discussions while we are seeing this through.
	On that basis, I hope that noble Lords will be content with this draft order.

On Question, Motion agreed to.
	[The Sitting was suspended from 8.08 to 8.40 pm.]

Pensions Bill

Consideration of amendments on Report resumed.
	Clause 123 [Power to amend provisions of Pensions Act 2004 relating to contribution notices etc]:

Lord McKenzie of Luton: moved Amendment No. 77C:
	Clause 123, leave out Clause 123

Lord McKenzie of Luton: My Lords, I shall speak also to the other amendments in the group. I hope that noble Lords will forgive me if I take a little time in speaking to these amendments as I hope it will help with subsequent amendments. Perhaps I can also take this opportunity to make clear, given the complexity of these amendments and the time it has taken to bring them together, that if there are residual issues, I accept that we should return to them at Third Reading.
	I am pleased to return to the important issue of amendments to the Pensions Regulator's anti-avoidance powers. Following our debate in Committee in July, the Government have undertaken further detailed discussions with a wide range of key stakeholders. We have listened to concerns that the detail of the new powers should be put on the face of the Bill and we have refined the legislation to ensure that it delivers on our intention to strike the right balance between protecting scheme members' benefits and ensuring that the legitimate interests of employers and investors are not unduly hampered.
	There are a number of interested parties and I am grateful for the helpful and considered input we have received, in particular from the CBI, the British Private Equity and Venture Capital Association, the TUC as well as the NAPF, the Association of Pension Lawyers and the Institute for Turnaround. As I have previously explained, in light of these consultations, the Government have concluded that the most appropriate way of tackling the kinds of risks posed by new business models offering alternatives to insured buy-outs of pension schemes is to amend the regulator's anti-avoidance powers. But we want to provide certainty for trustees, employers and investors about how the powers will be used. The Government have listened to the concerns raised both in this House and among consultees that the details should be in primary legislation and that there should be an appropriate framework of safeguards to ensure that the powers do not apply indiscriminately to individuals or corporate bodies. This set of government amendments seeks to deliver the detail.
	I should like to take noble Lords through some of the key changes, although I believe that we may return to other points later on in the debate. The government amendments will remove Clause 123 and in its place introduce a new clause as set out in Amendment No. 78A which seeks to put the key measures on the face of the Bill. Despite the removal of Clause 123, I would like to confirm to noble Lords that the assurances I gave to the House in relation to this clause still stand in relation to the new provisions that have been introduced by these amendments in my name.
	Before I go on to explain the detail of the government amendments I would like to say a few words about the regulator's clearance procedure. Clearance is a voluntary process that allows employers and others to obtain a statement from the regulator that it would not be reasonable to use its powers in relation to a particular event. Once given, clearance is binding on the regulator, providing the information that the employer provided is not materially different from the circumstances of the case. This will not change. No clearance statement that was given before the announcement of these proposals will be undone as a result of the amendments that I am proposing today. Further, since 14 April 2008, any clearance statements issued by the regulator would cover the use of the contribution notice and financial support direction powers both as they stand, and as they would be amended by these amendments.
	Turning to the first issue—I should point out that I am referring to paragraphs 1, 2, 3, 4 and 5 of the proposed new schedule—we propose to introduce a new alternative test for the use of the contribution notice power. This is set out at paragraph 2 of the schedule which amends Section 38 of the Pensions Act 2004 and inserts proposed new Sections 38A and 38B. Under Section 38 of the Pensions Act 2004, the regulator may issue a contribution notice where it considers that the main purpose, or one of the main purposes, of an act or failure to act was to avoid the employer's debt to the pension scheme as set out under Section 75 of the 1995 Act. This test of intent may frustrate the use of the regulator's powers even in circumstances where intervention may be appropriate. For example, it can be difficult to intervene if a party has simply failed to consider the interest of the pension scheme or the employer's liability to the scheme, even if the effect of the act was so significant as to reduce to nil the support of the employer standing behind the scheme.
	The Government consider that it is appropriate for the new alternative test to apply where the effect of an act or failure to act was materially detrimental to the likelihood of a member receiving their accrued benefits. I am pleased to say that there was considerable support for this approach from a number of consultees, although some were concerned that this proposal was not adequately targeted. We have taken these concerns seriously and, working with stakeholders, we have therefore introduced the following three important filters in the primary legislation to guide the use of this power.
	Paragraph 3 of the proposed new schedule places a requirement on the regulator to set out a statutory code of practice for the circumstances in which it expects to use this power. This is intended to narrow its application and the regulator has already published a draft list of circumstances to provide greater clarity on the approach. There is an established understanding of the role of codes of practice: they are given sufficient weight in courts and tribunals; they are subject to parliamentary scrutiny; and they can be used in evidence. They cannot, of course, usurp the role of primary legislation. The code of practice, on which the regulator has consulted and which has been approved by the Secretary of State after a period of laying in Parliament, gives rise to clear and legitimate expectations about the likely actions of the regulator. A draft code that has had a resolution passed against by either House during the laying period could obviously go no further.
	The public law duties of a body such as the regulator set high standards for the reasonableness of its behaviour. Acting in a way that was contrary to reasonable and legitimate expectations, prompted by a code of practice, would place the regulator at high risk of a successful legal challenge. I therefore believe that we have settled on the best approach. It avoids the uncertainty that might result from a non-statutory guidance and the potential for unnecessary legal dispute that could result from attempting to use legislation to deal with concepts that would be better treated in codes or guidance. I am glad that stakeholders such as the CBI, with which we have worked closely in developing our amendments, share our conclusions.
	The second important filter is provided by the factors that we have set out on the face of the Bill at proposed new section 38A(4). The regulator must consider these factors, where relevant, when determining whether an act or failure is materially detrimental. The test would engage only where there is a material detriment to the likelihood that members will receive accrued scheme benefits. This list of factors is intended to guide the regulator's considerations and therefore provide greater certainty to the industry. It is a non-exhaustive list and there are two reasons for this. First, the Government intend that employers should be able to put other factors to the regulator for consideration, where relevant, as part of their representations. The regulator has provided us with examples where this has happened and changed the outcome of the case to the extent that no action has been taken. Secondly, the pensions market is evolving, with new solutions being developed to enable sponsors to manage their pension liabilities. New risks of detriment to scheme members may emerge and it would not be possible to cater for all factors that may be relevant to a particular case. The amendment also includes two regulation-making powers to add new factors and to vary this list by amending existing factors. We do not envisage making regulations immediately but they provide flexibility to do so should the need arise.
	The third filter is the new statutory defence set out in Section 38B. This is designed to ensure that where the party had undertaken due diligence before the act and considered and, where appropriate, mitigated the material detriment, and could reasonably conclude that the act would not be materially detrimental, a notice on the grounds of material detriment could not be used. The Government's consultation on powers put forward a statutory defence based on the concept of whether the detrimental effect was reasonably foreseeable by the relevant parties at the time of the event. In response to that consultation and following helpful analysis from stakeholders, particularly the Association of Pension Lawyers, the Government consider that, on reflection, the concept of "reasonable foreseeability" would be too wide to provide sufficient comfort to be workable.
	The Government's intention is to allow those undertaking business transactions to self-regulate, to a certain extent, even if an act is within the scope of the material detriment test and the circumstances and factors limiting the use of the new power. The Government have therefore modified their approach, taking account of the input received, and the amendment sets out a clear three-step process for establishing the defence. It is based on the circumstances prevailing at the relevant time and on what the person knew, or ought to have known, at that time. It is designed to reflect the current due diligence process that should apply to a sponsor's consideration of the impact of an act on the pension scheme. That is intended to minimise undue impact on business. This approach would allow the relevant party to demonstrate, with evidence, that it was reasonable to conclude at the time that the effect of the act, or of failure to act, would not be materially detrimental. The government amendment includes a power to vary that defence as appropriate in the light of experience in operation.
	This new limb of the regulator's power to issue contribution notices has important controls that apply in respect of individuals and others. As I have explained, the use of the power would be circumscribed by the circumstances set out in the regulator's code, and the power would apply only where there had been a material detriment. Individuals could also rely on the statutory defence. Importantly, the government amendments would create two new reasonableness factors for the regulator to consider before considering issuing a contribution notice. These are, first, a new mandatory requirement that the regulator must consider the reasonableness of the party's actions in the circumstances of the case and, secondly, a new requirement that, where relevant, the regulator should consider whether there was a transfer of value to the party who could be subject to the contribution notice. These new factors create important protections for individuals, including new protection for individuals in relation to the existing powers.
	The government amendments also include a number of other important changes to the regulator's powers to ensure that they operate effectively. We intend to remove the words,
	"otherwise than in good faith",
	from the second limb of the existing contribution notice test. The current test sets an inappropriate evidential hurdle: it requires the regulator to prove that a person's intent was to avoid a debt and to prove that the act was undertaken in bad faith. That can be almost impossible to prove; evidence of bad faith can be concealed, or it may not exist.
	It is important to recognise that "good faith" does not currently apply in relation to the first limb of the existing test—that is, where a party is seeking to avoid recovery of a debt. Indeed, it is this other ground, which has never included a good faith element, that the regulator tells us is usually the relevant ground for employer-related actions, which would usually be the ones of concern to employers and associated or connected companies or individuals. The removal of good faith from one ground will not have any effect on this other ground at all.
	The absence of that requirement in that situation has not placed any undue burdens on sponsors or individuals. During our consultation, no one provided evidence that this has led to situations where the regulator has used its powers unfairly. However, I understand the concern that there must be a balance, and we must avoid any undue or disproportionate impacts on business. For that reason, further safeguards have been designed in response to the specific concerns raised. Those additions, which are set out at paragraph 7 of the proposed new schedule, will provide greater certainty and ensure that business is not hampered. The safeguards include both the new reasonableness factors that I have just referred to and a requirement that, where relevant, the regulator should consider the effect of the act, or failure to act, on other creditors and the likelihood of their being paid. This is an express requirement on the regulator that, where relevant, it should consider any detriment to the scheme in the context of a wider environment. That would apply in particular, for example, in situations where companies are in distress.
	The amendments also introduce a new alternative test for financial support directions. This is a correction to an anomaly in the trigger for the use of this power but it will not extend its range. I note that there are some amendments in relation to good faith and the changes to the FSD power; perhaps we will have the opportunity to discuss these further in the course of debate.
	We also want to enable the regulator to direct a contribution notice or financial support to the relevant scheme following a bulk transfer. This would apply only where the test for using these powers would have been satisfied had the transfer not happened. The provisions are designed to correct an unintended effect of the current legislation that puts members' benefits and the PPF at risk. New Sections 38A(5), 39B(8) and 43B(8) set out three regulation-making powers. These powers are intended to deal with situations relating to the calculation of debt, the method of transfer and the destination of members; that is, the scheme or arrangement into which they are transferred. In particular, new Sections 39B(8) and 43B(8) provide regulation-making powers to apply the new provisions—Sections 39A and 43A—to arrangements other than standard transfers from one scheme into another to enable the regulator to continue to protect members' benefits where the transfer or other arrangements could put those benefits at risk and to ensure that the regulator's powers remain effective in an innovative market.
	Regulations made under these three new powers would require consultation under Section 317 of the 2004 Act, and are subject to the affirmative procedure. New Sections 39B(10) and 43B(10) and paragraph 16 of the new schedule provide that for the first set of regulations made under new Sections 39B(8) and 43B(8), the resulting regulations will have retrospective effect to the date of tabling the amendments—that is, 20 October 2008. The Government consider that that is crucial to prevent the kind of behaviour that these provisions are aiming to address. There will be a significant risk in not making this power retrospective, and that from the date of announcement of the changes, the market would be aware of the possibility of circumvention of the regulator's powers in relation to transfers. It would then be open to develop alternative methods of transfer or alternative types of schemes or arrangements before the Government made regulations to prevent this. That could create serious risks to scheme members' benefits and the Pension Protection Fund.
	New Section 39B(10) provides that the retrospective effect of the regulation-making power would apply in a more limited way to subsequent regulations, which would have effect from the date the Government announce their intention to make such regulations. New Section 43B(10) provides the same in respect of financial support directions.
	I emphasise that the regulation-making powers at new Sections 39B(8) and 43B(8) are targeted. They are limited to situations where there is a transfer, and relate only to ensuring that the previously unforeseen gaps in the current legislation that the Government are attempting to address with these specific amendments remain closed. The powers are circumscribed; they are not Henry VIII powers to amend the primary legislation. More importantly, regulations made under this power would not affect the overwhelming majority of employers; they would apply only to those cases where the test for a contribution notice or financial support direction had been met.
	Finally, we intend to make it clear that contribution notices can be issued in relation to a series of acts or failures to act, and not simply in respect of a single act. The Government consider that the Pensions Act 2004 should already be read in this way but is amended in the legislation for clarity. This clarification was not considered unreasonable by many of the responses to the consultation, although most respondents were critical of the proposal that it should have effect from 2004. The Government's clarification would therefore come into effect from Royal Assent, except where the series would apply to the new detriment test. In that case, the clarification would come into effect from 14 April 2008, the same time as the "material detrimental" test comes into effect. The Government have sought to avoid the confusion for all concerned that would arise if this test and the clarification provisions that apply the series to that test had effect from different dates.
	It is the Government's view that the amendment would not disturb the regulator's current approach. The Government consider that the amendments will allow the regulator to intervene where appropriate without unduly hindering legitimate business and that the anti-avoidance powers would remain effective powers of last resort.
	I apologise again for a somewhat extended introduction, but I thought that it was important to get this on the record. I beg to move.

Baroness Noakes: My Lords, I thank the Minister for his comprehensive introduction to this group of amendments. I have great pleasure in supporting Amendment No. 77C and the removal of Clause 123. My noble friend Lord Lucas and I have tabled a number of amendments to the other amendments in the group. We shall not come to them just yet, but I will make some opening remarks on this area.
	The Minister will recall that we spent several days in July debating the Government's amendment which inserted Clause 123. He will doubtless recall that we were critical of the Government for introducing such a wide power on the back of what we saw as a flawed consultation in the sense that there was no evidence that the Government were listening to any of the responses that they had received. There was no regulatory impact assessment, and there was wide concern among business groups that the Government simply did not understand the practical impact of their proposals. As the Minister will recall, we asked him not to press his amendment so as to enable proper negotiations during the summer. It is, however, a surprise that the Government have concluded that the amendment that they forced through in the summer, which is now Clause 123, is to be removed from the Bill. We say amen to that.
	I pay tribute to the Minister, his colleagues in the department and the staff of the DWP for being prepared to reopen the issues and engage in constructive dialogue with the people who have put the concerns to them. While the legislation raises issues that we will wish to probe in the remainder of our session, we are much happier with its construction—there is not the wide Henry VIII power, but a proper employer defence. We have the substance now in primary legislation; indeed, we even have a draft statutory code of practice, for which I thank the Minister. I shall not say anything further at this stage other than to thank the Minister for agreeing that we can come back at Third Reading if any points arise. The Minister will be aware that, because of late tabling, we received comments from the interested parties at a very late stage, and we cannot be sure that we have tabled amendments which allow us to tease out all the matters. I welcome the amendment.

Lord Oakeshott of Seagrove Bay: My Lords, from these Benches, I welcome the amendment and thank the Minister for his comprehensive introduction. We, too, are pleased that the Government have got over their macho moment when they were pushing that amendment in July. Wiser counsels have prevailed. I am glad to see that there has been extensive and thorough consultation during the summer. As I listened to the details of what the Minister said, only one question arose: is he sure that the Pensions Regulator does not feel unduly fettered in its activity by all these changes? In general, however, it is clear that great thought has been given to the matter, and we are very pleased that much more properly thought through and consulted on rules are coming forward.

Lord Lucas: My Lords, I add to the chorus by saying that I am delighted by what the Government have done—it is great progress. Although I have tabled many detailed amendments, they focus on one matter, which is the code and how secure people can be in the belief that the matters in it are those to which the material detriment test and other aspects of the amendment will apply. Anybody involved in the activities set out in the code, unless they are of criminal intent or do not have their heads screwed on, should know that they should seek clearance for them, or they should read the regulations extremely carefully and make sure that they do everything by the book. But if it is possible to go outside the code and trespass on other areas of ordinary commercial life or other sorts of transactions, the protections offered by this structure become much less relevant—all the defence that is there of having gone through the proper processes to make sure that you have not caused detriment. If you thought that this was not a matter that would ever come under these provisions you would not have done that. Your records will not be in place and you will be in deep trouble.
	As the Minister said, you cannot fetter the regulator's discretion. It will be a big matter how individuals view this and how they are advised to view this; whether they are told by their lawyers, "Look, this is something that is reasonably safe and I would not worry about it too much", or "You are doing something every day that might attack the pension fund" and you will have to get clearance every time you breathe out, near enough. The voices that are coming from the lawyers are going in that direction.
	The Minister says that he expects there to be a peak in applications to the regulator soon after these provisions come into force and that with experience they will relatively quickly die away, as they did when these provisions were first introduced in the previous Act. I hope that that is right. To a large extent, we trust the judgment of the Minister and his officials that they have things right in that regard and that is the way that things will actually work. But the Minister needs to say more about the circumstances under which he sees the regulator going outside the code to use the powers that are in this amendment for something that does not fall within the sort of transaction set out in the code.
	There is a considerable worry out there, particularly among those people who are involved in trying to sort out companies in difficulties who have to move fast and take rough and ready decisions to make things work. They have to take risks, although they often do not benefit enormously from doing so. They are not in there to make a great capital gain from themselves but as hired hands to put out the fire. They will be taking enormous risks under the terms of this amendment, and it comes down to, will the regulator stick within the code or start running outside? If the Minister could give us as much comfort as he can that he cannot see circumstances where the regulator would need to go outside the code, that would be a great help in calming people's fears. There is a worry that the regulator might choose an unexpected opportunity—perhaps not that serious an opportunity—to solve a particular problem by saying, "I have seen the code but I don't feel like being bound by it in these circumstances".

Lord McKenzie of Luton: My Lords, I will respond briefly to those comments. Amendments are about to be moved to the amendment, but I should like to say that I am grateful for the support and encouragement from all three noble Lords who have spoken. I add my thanks to the staff of the DWP, who worked extensively and diligently on moving from where we are. The noble Lord, Lord Oakeshott, called it our macho moment. I am not sure that I would fully subscribe to that. However, they have done a substantial job but have engaged fully with stakeholders, which has been the key to moving this forward.
	The noble Lord, Lord Lucas, posed a very real point about what comfort there is in the regulator's code. The regulator's code, as I said, has evidential value and the regulator must always have regard to it, although the regulator would always and must act on a case-by-case basis. In the Government's view, it would be difficult to argue that the regulator could reasonably act beyond the code unless there were frankly exceptional circumstances. However, the regulator tells us that it is unable to think of any circumstances in which it would want to act outside the code. I hope that that is at least a degree of reassurance to the noble Lord.

On Question, amendment agreed to.

Lord Oakeshott of Seagrove Bay: moved Amendment No. 78:
	After Clause 123, insert the following new Clause—
	"Financial Services Authority: duty in relation to Pension Protection Fund
	The Financial Services Authority must exercise its powers to regulate those bodies for which it is responsible so as to minimise the risk of compensation from the Pension Protection Fund becoming payable in accordance with Part 2 of the Pensions Act 2004 (c. 35)."

Lord Oakeshott of Seagrove Bay: My Lords, this is to some extent a probing amendment; I apologise for moving it on Report rather than in Committee. It is prompted by the collapse, in particular, of Lehman Brothers and the hole that that exposed in its pension fund. Clearly, I do not need to tell noble Lords that there must be a considerable danger that other high-rolling banks' pension funds will also be at risk. It struck me as I studied those reports and thought about the Lehman Brothers pension fund that organisations regulated by the Financial Services Authority, more than almost any other more traditional businesses, can go so fast from feast to famine. They can be in a situation, as Lehman Brothers appears to have been, where they are making large profits and large bonuses are being declared, and then suddenly go into administration. There are reports that there may be a deficit of as much as £100 million in the Lehman Brothers fund. I know that there have been some reassuring noises that it will not be as much as that, but it is public knowledge that it is being considered for admission to the Pension Protection Fund.
	The spirit of the amendment is that there should be some duty or extra responsibility on the FSA to be aware of how quickly banks can go into deficit. There is also of course a large deficit in the pension fund of Northern Rock. I suggest that this issue should at least be drawn to the FSA's attention, when these situations develop so fast. I ask the Minister if he has information to give us, particularly on the Lehman Brothers pension fund. I beg to move.

Baroness Thomas of Winchester: My Lords, I have only a small contribution to add to what my noble friend has said. He is the City expert; there are many others in this House, and I am not one at all. As a lay person, I have been surprised that the FSA does not appear to have any powers to protect these company pension schemes. Some of the recent newspaper reports may not be accurate when they say that some foreign loan companies in this country have raided pension schemes before being declared bankrupt, but it makes one wonder whether the FSA powers in this area are as strong as they should be. Taxpayers should at least know that somebody is looking out for their best interests to prevent compensation being paid out from the Pension Protection Fund. I would welcome the Minister's reassurance on this point.

Lord Skelmersdale: My Lords, I would be surprised if most of the points of the noble Lord, Lord Oakeshott, were not covered by Section 146(1) of the 2004 Act:
	"Regulations may provide that where the Board is satisfied that an eligible scheme was not such a scheme throughout such period as may be prescribed, the Board must refuse to assume responsibility for the scheme under this Chapter".
	That would clearly cover the point in part. I also note that there is a debate on the economy, to which the Minister will no doubt—no, perhaps he will not be contributing to that debate on Monday. I am sure that regulation by the FSA will figure somewhat strongly in it.

Lord McKenzie of Luton: My Lords, the amendment of the noble Lord, Lord Oakeshott, responds to a keenly felt issue in our current economic situation, and gives me the opportunity to discuss the important issues he raised in relation to the PPF and the FSA. It is important that we ensure clarity regarding regulatory roles and consistency in approach. I am pleased to say that the current arrangements provide a flexible and robust framework for protection of the PPF.
	I agree with the broad intention behind the amendment. When the Government established the PPF under the 2004 Act we also created the Pensions Regulator and gave it an explicit objective to protect the PPF. We saw then, along with all sides of this House, that the PPF had to be protected adequately. Although I can see the intention behind the amendment, I do not agree that it is appropriate. It would duplicate the existing arrangements, which at worst could undermine the effectiveness of our regulatory regime.
	The Government work closely with business to develop regulations that complement and do not complicate the way people work to keep the UK competitive, mindful of potential regulatory burdens. Well targeted and proportionate regulation can deliver effective outcomes for the market, scheme members and the PPF. This amendment is neither well targeted nor proportionate: it would simply increase regulation to no obvious benefit.
	The Pensions Regulator is the regulator of all work-based schemes, including those within the financial sector that are sponsored by FSA-regulated firms. It has an express duty to protect the PPF, and in so doing provides a holistic and consistent approach to minimising the risk of situations arising which may lead to compensation becoming due. The regulator's approach to minimising the risk to the PPF through regulating scheme funding is designed to be flexible according to different circumstances. The regulator considers wider aspects, including the strength of the employer that is responsible for supporting the scheme.
	The FSA's statutory objectives relate to the regulation of firms in the finance sector and the protection of consumers of those firms' products and services. It does not consider the firms' pension schemes from the perspective of the schemes' funding status, or the impact on scheme members. The FSA has rules for taking into account the impact of a firm's pension obligation on the prudential position of the regulated firm. Therefore, the FSA's focus is not the pension scheme itself and its assets and liabilities, but rather the firm's funding obligations to the pension scheme. There are well defined and adequate regulatory arrangements in place between the FSA and the Pensions Regulator, and they work closely together on the supervision of pensions according to their statutory functions. Indeed, the noble Lord asked for such co-operation. These arrangements have been the subject of a recent independent review led by Paul Thornton. The review, which was completed in June last year, found that the existing framework was working well. Measures were recommended, however, to further strengthen this liaison, which the Government accepted. I am pleased to say that the two bodies have undertaken a programme of well co-ordinated activity to implement the review's proposals.
	For example, there are regular meetings at official level on areas of mutual interest, including management of risks to DC. The amendment would also mean that financial capability was included, alongside regular bilateral engagement at chief executive level. This is underpinned by a Memorandum of Understanding. This joint working has resulted in a number of positive outcomes, including publication of a joint guide on the regulation of workplace contract-based schemes. An FSA-regulated firm would be treated differently from those schemes sponsored by companies in other sectors. It is also worth noting that this amendment would mean that schemes sponsored by an FSA-regulated firm would be treated differently from those schemes sponsored by companies in other sectors. My apologies; that note is nonsense.
	There is no obvious reason to single out banks and financial institutions, but not other sponsors with industry representatives, to clarify the respective roles and responsibilities, and similar schemes. Schemes should have equal protection in law, no matter the sector, particularly in those areas where the regulator and the FSA work together.
	In considering the additional duty for the FSA in relation to the financial sector, we would also need to consider the duty in respect of other regulated industries and other sectors. The airline industry and others are subject to economic regulation and have significant pension schemes, as do other sectors, regardless of the status of regulation to which they are subject. The amendment would therefore lead to an increase in regulatory burden and to inconsistent and incoherent arrangements in respect of other industries—for example, regulation of pension schemes in respect of the protection afforded to the PPF. The Pensions Regulator is the sole, proactive, risk-based protector of the PPF. I hope that I have given the noble Lord sufficient comfort that the current arrangement is the right one and should not be altered, notwithstanding the issues concerning the banking sector in particular at the moment.
	On Lehman Brothers, the scheme is undergoing assessment for the PPF, which involves calculating the extent to which scheme assets meet liabilities. A PPF valuation approach will give different numbers from, say, a full buyout. Obviously, there are issues of confidentiality here, but we do not recognise the £100 million figure. I hope that has been helpful to the noble Lord. We ought to have clarity on who is regulating who but, clearly, there is a responsibility for the FSA, particularly in relation to those firms that are engaged in pension provision.

Lord Oakeshott of Seagrove Bay: My Lords, I thank noble Lords who have spoken, and I thank the Minister for that very full reply. In particular, I hope that the Pensions Regulator will take full note that it is the sole, proactive, risk-based protector, as the Minister said. I would be interested to see what he called the Memorandum of Understanding on how the FSA and the Pensions Regulator work closely together. That was reassuring, but I would like to see it.
	On the argument that there is no reason to single out banks and the financial sector for special treatment—the noble Lord talked about airlines—we have just had to nationalise quite large parts of that sector, and if the noble Lord thinks about it, he might realise that there is rather more risk here and perhaps that special attention on the part of the Pensions Regulator would be necessary. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McKenzie of Luton: moved Amendment No. 78A:
	Before Clause 124, insert the following new Clause—
	"Amendments of provisions of Pensions Act 2004 relating to contribution notices or financial support directions
	Schedule (Contribution notices and financial support directions under Pensions Act 2004) (which amends the Pensions Act 2004 in relation to contribution notices and financial support directions) has effect."
	On Question, amendment agreed to.

Lord McKenzie of Luton: moved Amendment No. 78B:
	Before Schedule 9, insert the following new Schedule—
	"Contribution notices and financial support directions under Pensions Act 2004Introduction
	1 The Pensions Act 2004 (c. 35) is amended as follows.
	Contributions notices: material detriment test
	2 (1) In section 38(5)(a) (main purpose or one of main purposes of act or failure to prevent recovery of employer debt under section 75 of the Pensions Act 1995 (c. 26) etc.), after "is of the opinion that" insert "the material detriment test is met in relation to the act or failure (see section 38A) or that".
	(2) After section 38 insert—
	"38A Section 38 contribution notice: meaning of "material detriment test"
	(1) For the purposes of section 38 the material detriment test is met in relation to an act or failure if the Regulator is of the opinion that the act or failure has detrimentally affected in a material way the likelihood of accrued scheme benefits being received (whether the benefits are to be received as benefits under the scheme or otherwise).
	(2) In this section any reference to accrued scheme benefits being received is a reference to benefits the rights to which have accrued by the relevant time being received by, or in respect of, the persons who were members of the scheme before that time.
	(3) In this section "the relevant time" means—
	(a) in the case of an act, the time of the act, or(b) in the case of a failure—(i) the time when the failure occurred, or(ii) where the failure continued for a period of time, the time which the Regulator determines and which falls within that period;and, in the case of acts or failures to act forming part of a series, any reference in this subsection to an act or failure is a reference to the last of the acts or failures in that series.
	(4) In deciding for the purposes of section 38 whether the material detriment test is met in relation to an act or failure, the Regulator must have regard to such matters as it considers relevant, including (where relevant)—
	(a) the value of the assets or liabilities of the scheme or of any relevant transferee scheme,(b) the effect of the act or failure on the value of those assets or liabilities,(c) the scheme obligations of any person,(d) the effect of the act or failure on any of those obligations (including whether the act or failure causes the country or territory in which any of those obligations would fall to be enforced to be different),(e) the extent to which any person is likely to be able to discharge any scheme obligation in any circumstances (including in the event of insolvency or bankruptcy),(f) the extent to which the act or failure has affected, or might affect, the extent to which any person is likely to be able to do as mentioned in paragraph (e), and(g) such other matters as may be prescribed.
	(5) In subsection (4) "scheme obligation" means a liability or other obligation (including one that is contingent or otherwise might fall due) to make a payment, or transfer an asset, to—
	(a) the scheme, or(b) any relevant transferee scheme in respect of any persons who were members of the scheme before the relevant time.
	(6) In this section—
	(a) "relevant transferee scheme" means any work-based pension scheme to which any accrued rights to benefits under the scheme are transferred;(b) any reference to the assets or liabilities of any relevant transferee scheme is a reference to those assets or liabilities so far as relating to persons who were members of the scheme before the relevant time.
	(7) For the purposes of subsection (6)(a) the reference to the transfer of accrued rights of members of a pension scheme to another pension scheme includes a reference to the extinguishing of those accrued rights in consequence of the obligation to make a payment, or transfer an asset, to that other scheme.
	(8) In this section—
	(a) "work-based pension scheme" has the meaning given by section 5(3); (b) any reference to rights which have accrued is to be read in accordance with section 67A(6) and (7) of the Pensions Act 1995 (reading any reference in those subsections to a subsisting right as a reference to a right which has accrued).
	(9) In deciding for the purposes of this section whether an act or failure has detrimentally affected in a material way the likelihood of accrued scheme benefits being received, the following provisions of this Act are to be disregarded—
	(a) Chapter 3 of Part 2 (the Board of the Pension Protection Fund: pension protection), and(b) section 286 (the financial assistance scheme for members of certain pension schemes).
	(10) Regulations may amend any provision of subsections (4) to (8).
	38B Section 38 contribution notice issued by reference to material detriment test: defence
	(1) This section applies where—
	(a) a warning notice is given to any person ("P") in respect of a contribution notice under section 38, and(b) the contribution notice under consideration would be issued wholly or partly by reference to the Regulator's opinion that the material detriment test is met in relation to an act or deliberate failure to act to which P was a party.
	(2) If the Regulator is satisfied that P has shown that—
	(a) conditions A and C are met, and(b) where applicable, condition B is met,the Regulator must not issue the contribution notice by reference to its being of the opinion mentioned in subsection (1)(b).
	(3) Condition A is that, before becoming a party to the act or failure, P gave due consideration to the extent to which the act or failure might detrimentally affect in a material way the likelihood of accrued scheme benefits being received.
	(4) Condition B is that, in any case where as a result of that consideration P considered that the act or failure might have such an effect, P took all reasonable steps to eliminate or minimise the potential detrimental effects that the act or failure might have on the likelihood of accrued scheme benefits being received.
	(5) Condition C is that, having regard to all relevant circumstances prevailing at the relevant time, it was reasonable for P to conclude that the act or failure would not detrimentally affect in a material way the likelihood of accrued scheme benefits being received.
	(6) P is to be regarded as giving the consideration mentioned in condition A only if P has made the enquiries, and done the other acts, that a reasonably diligent person would have made or done in the circumstances.
	(7) For the purposes of condition C—
	(a) "the relevant time" means the time at which the act occurred or the failure to act first occurred;(b) the reference to the circumstances mentioned in that condition is a reference to those circumstances of which P was aware, or ought reasonably to have been aware, at that time (including acts or failures to acts which have occurred before that time and P's expectation at that time of other acts or failures to act occurring).
	(8) In the case of acts or failures to act forming part of a series, P is to be regarded as having shown the matters mentioned in subsection (2) if P shows in the case of each of the acts or failures in the series that—
	(a) conditions A and C are met, and (where applicable) condition B is met, in relation to the act or failure, or(b) the act or failure was one of a number of acts or failures (a "group" of acts or failures) selected by P in relation to which the following matters are shown.
	(9) The matters to be shown are that—
	(a) before becoming a party to the first of the acts or failures in the group, condition A is met in relation to the effect of the acts or failures in the group taken together,(b) condition B is (where applicable) met in relation to that effect, and(c) condition C is then met in relation to each of the acts or failures in the group (determined at the time at which each act or failure concerned occurred or first occurred).
	(10) If at any time P considers that condition C will not be met in relation to any particular act or failure in the group—
	(a) the previous acts or failures in the group are to be regarded as a separate group for the purposes of subsection (8), and(b) P may then select another group consisting of the particular act or failure concerned, and any subsequent act or failure, in relation to which P shows the matters mentioned in subsection (9).Nothing in paragraph (b) is to be read as preventing P from showing the matters mentioned in subsection (8)(a).
	(11) If—
	(a) P is unable to show in the case of each of the acts or failures in the series that the matters set out in subsection (8)(a) or (b) are met, but(b) does show in the case of some of them that those matters are met,the acts or failures within paragraph (b) are not to count for the purposes of section 38A as acts or failures to act in the series.
	(12) In this section—
	(a) "a warning notice" means a notice given as mentioned in section 96(2)(a);(b) any reference to an act or failure to which a person is a party has the same meaning as in section 38(6)(a);(c) any reference to the accrued scheme benefits being received has the same meaning as in section 38A;and subsection (9) of section 38A applies for the purposes of conditions A to C as it applies for the purposes of that section.
	(13) Regulations may amend this section."
	3 In section 90(2) (the matters in relation to which the Pensions Regulator must issue codes of practice), after paragraph (a) insert—
	"(aa) the circumstances in which the Regulator expects to issue contribution notices under section 38 as a result of being of the opinion that the material detriment test is met in relation to an act or failure;".
	4 In section 96 (standard procedure), after subsection (1) insert—
	"(1A) In any case where—
	(a) a warning notice is given to any person in respect of a contribution notice under section 38, and(b) the contribution notice under consideration would be issued wholly or partly by reference to the Regulator's opinion that the material detriment test is met in relation to an act or failure,the standard procedure must provide for the following matters.
	(1B) The matters are—
	(a) a requirement for the warning notice to explain the general effect of section 38B, and(b) a requirement for the person to be given an opportunity before the contribution notice is issued to show the matters mentioned in subsection (2) of that section."
	5 In section 316(2) (subordinate legislation under Act that is subject to affirmative resolution procedure), before paragraph (a) insert—
	"(za) regulations under section 38A(10) or 38B(13) (section 38 contribution notices: "the material detriment test");".Contributions notices: acting or failing to act otherwise than in good faith
	6 In section 38(5) (acts or failures to act in relation to which Pensions Regulator may issue contribution notices), in paragraph (a)(ii), omit "otherwise than in good faith,".
	Whether reasonable for Pensions Regulator to issue contribution notice
	7 (1) Section 38 (contribution notices where avoidance of employer debt) is amended as follows.
	(2) In subsection (3) (conditions which must be met before Pensions Regulator can issue contribution notice), for paragraph (d) substitute—
	"(d) the Regulator is of the opinion that it is reasonable to impose liability on the person to pay the sum specified in the notice, having regard to—(i) the extent to which, in all the circumstances of the case, it was reasonable for the person to act, or fail to act, in the way that the person did, and(ii) such other matters as the Regulator considers relevant, including (where relevant) the matters falling within subsection (7)."
	(3) In subsection (7) (list of relevant matters for purposes of subsection (3)(d))—
	(a) for the words from the beginning to "the following matters—" substitute "The matters within this subsection are—"; and(b) after paragraph (e) insert—"(ea) the value of any benefits which directly or indirectly the person receives, or is entitled to receive, from the employer or under the scheme;(eb) the likelihood of relevant creditors being paid and the extent to which they are likely to be paid;".
	(4) After that subsection insert—
	"(7A) In subsection (7)(eb) "relevant creditors" means—
	(a) creditors of the employer, and(b) creditors of any other person who has incurred a liability or other obligation (including one that is contingent or otherwise might fall due) to make a payment, or transfer an asset, to the scheme."Contribution notices: series of acts or failures to act
	8 (1) In section 38 (contribution notices where avoidance of employer debt), at the end insert—
	"(12) Subsection (13) applies if the Regulator is of the opinion that—
	(a) a person was a party to a series of acts or failures to act,(b) each of the acts or failures in the series falls within subsection (5)(b) and (c), and(c) the material detriment test is met in relation to the series, or the main purpose or one of the main purposes of the series was as mentioned in subsection (5)(a)(i) or (ii).
	(13) The series of acts or failures to act is to be regarded as an act or failure to act falling within subsection (5) (and, accordingly, the reference in subsection (6)(b)(i) to the act or failure to act falling with subsection (5) is to the first of the acts or failures to act in the series)."
	(2) In section 39 (the sum specified in a section 38 contribution notice)—
	(a) in subsection (4), after "means" insert "(subject to subsection (4A)"; and(b) after subsection (4) insert— "(4A) In the case of a series of acts or failures to act, "the relevant time" is determined by reference to whichever of the acts or failures in the series is, in the Regulator's opinion, most appropriate."Contributions notices and financial support directions: bulk transfers
	9 After section 39 (the sum specified in a section 38 contribution notice) insert—
	"39A Section 38 contribution notice: transfer of members of the scheme
	(1) This section applies where—
	(a) the Regulator is of the opinion that in relation to a scheme ("the initial scheme") in relation to which section 38 applies—(i) an act or failure to act falling within subsection (5) of that section has occurred (or first occurred) at any time, and(ii) the other conditions in that section for issuing a contribution notice are met in relation to the initial scheme (or, but for any transfer falling within paragraph (b), would be met), and(b) the accrued rights of at least two persons who were members of the initial scheme are transferred at that or any subsequent time to one or more work-based pension schemes (whether by virtue of the act or otherwise).
	(2) The Regulator may issue a contribution notice under section 38 in relation to any transferee scheme (and, accordingly, any reference in section 40 or 41 to the scheme is to the transferee scheme).
	(3) In the case of any contribution notice issued by virtue of subsection (2) to any transferee scheme which is not within subsection (5)(a) or (b), section 39 has effect as if any reference in that section to the scheme were a reference to whichever of—
	(a) the initial scheme, and(b) the transferee scheme,the Regulator determines to be more appropriate in the circumstances.
	(4) In any case where section 39 has effect in relation to the transferee scheme by virtue of subsection (3), any reference in that section to a debt under section 75 of the 1995 Act is a reference to so much of that debt as, in the Regulator's opinion, is attributable to those members of the transferee scheme who were members of the initial scheme.
	(5) In the case of any contribution notice issued by virtue of subsection (2) to any transferee scheme which is—
	(a) a scheme to which section 75 of the 1995 Act does not apply, or(b) a scheme to which that section does apply in a case where the liabilities of the scheme that would be taken into account for the purposes of that section do not relate to the members of the initial scheme,the sum specified by the Regulator in the notice is determined in accordance with regulations (and not in accordance with section 39).
	(6) The Regulator may also issue a direction to the trustees or managers of any transferee scheme requiring them to take specified steps to secure that the sum payable under the notice is applied for the benefit of the members of the transferee scheme who were members of the initial scheme.
	(7) If the trustees or managers fail to comply with a direction issued to them under subsection (6), section 10 of the 1995 Act (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.
	39B Section 39A: supplemental
	(1) In section 39A a "transferee scheme", in relation to any time, means any work-based pension scheme—
	(a) to which the accrued rights of at least two persons who were members of the initial scheme have been transferred, and(b) of which any of those persons are members at that time.
	(2) For the purposes of section 39A(1) and subsection (1) above it does not matter whether any rights are transferred to a work-based pension scheme directly from the initial scheme or following one or more other transfers to other work-based pension schemes.
	(3) For the purposes of section 39A and this section references to the transfer of accrued rights of members of a pension scheme to another pension scheme include references to the extinguishing of those accrued rights in consequence of the obligation to make a payment, or transfer an asset, to that other scheme.
	(4) In section 39A and this section—
	(a) "the 1995 Act" means the Pensions Act 1995;(b) "work-based pension scheme" has the meaning given by section 5(3);(c) any reference to rights which have accrued is to be read in accordance with section 67A(6) and (7) of the 1995 Act (reading any reference in those subsections to a subsisting right as a reference to a right which has accrued).
	(5) Section 39A applies even if the initial scheme—
	(a) is wound up as a result of any transfer falling within subsection (1)(b) of that section, or(b) otherwise ceases to exist at the time of the transfer or at any subsequent time.
	(6) Accordingly, in any such case, in subsection (1) of that section—
	(a) the reference to a scheme to which section 38 applies is a reference to a scheme which was such a scheme before the transfer;(b) the reference to any conditions in section 38 being met is a reference to any conditions in that section that, but for the transfer, would have been met in relation to the scheme.
	(7) Nothing in section 39A or this section is to be read as preventing the Regulator from issuing a contribution notice in relation to the initial scheme.
	(8) Regulations may make provision applying, with or without modifications, any provision made by or under section 39A or this section in relation to any scheme or other arrangement in any case where the accrued rights of persons who were members of the initial scheme are transferred or extinguished directly or indirectly in consequence of or otherwise in connection with—
	(a) the making of any payment at any time to or for the benefit of the scheme or other arrangement,(b) the transfer of any asset at any time to or for the benefit of the scheme or other arrangement,(c) the discharge (wholly or partly) at any time of any liability incurred by or on behalf of the scheme or other arrangement, or(d) the incurring at any time of any obligation to do any act falling within paragraph (a) to (c).
	(9) Any reference in subsection (8)(a) to (d) to the doing of an act of any description at any time in relation to the scheme or other arrangement includes a reference to the doing of an act of that description at any previous time in relation to any other scheme or other arrangement.
	(10) Regulations under subsection (8) may—
	(a) make provision having effect in relation to any case where rights are transferred or extinguished on or after the date on which the Secretary of State publishes a statement of the intention to make the regulations; and(b) without prejudice to section 315(5), make consequential provision applying with modifications any provision of this Act which relates to contribution notices under section 38."
	10 After section 43 (financial support directions) insert—
	"43A Financial support directions: transfer of members of the scheme
	(1) This section applies where—
	(a) the Regulator is of the opinion by reference to any time that the conditions in section 43 for issuing a financial support direction are met in relation to a scheme ("the initial scheme") in relation to which that section applies (or, but for any transfer falling within paragraph (b), would be met), and(b) the accrued rights of at least two persons who were members of the initial scheme are transferred at any subsequent time to one or more work-based pension schemes.
	(2) The Regulator may issue a financial support direction under that section in relation to any transferee scheme (and, accordingly, any reference in section 45 or any of sections 47 to 50 to the scheme is to the transferee scheme).
	(3) The Regulator may also issue a direction to the trustees or managers of any transferee scheme requiring them to take specified steps to secure that the financial support is put in place for the benefit of the members of the transferee scheme who were members of the initial scheme.
	(4) If the trustees or managers fail to comply with a direction issued to them under subsection (3), section 10 of the 1995 Act (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.
	43B Section 43A: supplemental
	(1) In section 43A a "transferee scheme", in relation to any time, means any work-based pension scheme—
	(a) to which the accrued rights of at least two persons who were members of the initial scheme have been transferred, and(b) of which any of those persons are members at that time.
	(2) For the purposes of section 43A(1) and subsection (1) above it does not matter whether any rights are transferred to a work-based pension scheme directly from the initial scheme or following one or more other transfers to other work-based pension schemes.
	(3) For the purposes of section 43A and this section references to the transfer of accrued rights of members of a pension scheme to another pension scheme include references to the extinguishing of those accrued rights in consequence of the obligation to make a payment, or transfer an asset, to that other scheme.
	(4) In section 43A and this section—
	(a) "the 1995 Act" means the Pensions Act 1995;(b) "work-based pension scheme" has the meaning given by section 5(3);(c) any reference to rights which have accrued is to be read in accordance with section 67A(6) and (7) of the 1995 Act (reading any reference in those subsections to a subsisting right as a reference to a right which has accrued).
	(5) Section 43A applies even if the initial scheme—
	(a) is wound up as a result of any transfer falling within subsection (1)(b) of that section, or(b) otherwise ceases to exist at the time of the transfer or at any subsequent time.
	(6) Accordingly, in any such case, in subsection (1) of that section—
	(a) the reference to a scheme to which section 43 applies is a reference to a scheme which was such a scheme before the transfer;(b) the reference to any conditions in section 43 being met is a reference to any conditions in that section that, but for the transfer, would have been met in relation to the scheme.
	(7) Nothing in section 43A or this section is to be read as preventing the Regulator from issuing a financial support direction in relation to the initial scheme.
	(8) Regulations may make provision applying, with or without modifications, any provision made by section 43A or this section in relation to any scheme or other arrangement in any case where the accrued rights of persons who were members of the initial scheme are transferred or extinguished directly or indirectly in consequence of or otherwise in connection with—
	(a) the making of any payment at any time to or for the benefit of the scheme or other arrangement,(b) the transfer of any asset at any time to or for the benefit of the scheme or other arrangement, (c) the discharge (wholly or partly) at any time of any liability incurred by or on behalf of the scheme or other arrangement, or(d) the incurring at any time of any obligation to do any act falling within paragraph (a) to (c).
	(9) Any reference in subsection (8)(a) to (d) to the doing of an act of any description at any time in relation to the scheme or other arrangement includes a reference to the doing of an act of that description at any previous time in relation to any other scheme or other arrangement.
	(10) Regulations under subsection (8) may—
	(a) make provision having effect in relation to any case where rights are transferred or extinguished on or after the date on which the Secretary of State publishes a statement of the intention to make the regulations; and(b) without prejudice to section 315(5), make consequential provision applying with modifications any provision of this Act which relates to financial support directions under section 43."
	11 In section 306(2) (overriding requirements)—
	(a) after paragraph (d) insert—"(da) any direction issued by the Regulator under section 39A(6);"; and(b) after paragraph (e) insert—"(ea) any direction issued by the Regulator under section 43A(3);".
	12 In section 316(2) (subordinate legislation under Act that is subject to affirmative resolution procedure), after paragraph (za) (as inserted by paragraph 5 of this Schedule) insert—
	"(zb) regulations under section 39A(5), 39B(8) or 43B(8) (contribution notices and financial support directions: bulk transfers);".
	13 In Part 4 of Schedule 2 (the reserved regulatory functions of Pensions Regulator: functions under Act)—
	(a) after paragraph 30 insert—
	"30A The power to issue a direction under section 39A(6) to any person."; and
	(b) after paragraph 33 insert—
	"33A The power to issue a direction under section 43A(3) to any person."
	Financial support directions: meaning of "insufficiently resourced"
	14 (1) In section 44(3) (meaning of "insufficiently resourced"), for paragraph (b) substitute—
	"(b) condition A or B is met."
	(2) After subsection (3) insert—
	"(3A) Condition A is met if—
	(a) there is at that time a person who falls within section 43(6)(b) or (c), and(b) the value at that time of that person's resources is not less than the relevant deficit, that is to say the amount which is the difference between— (i) the value of the resources of the employer, and(ii) the amount which is the prescribed percentage of the estimated section 75 debt.
	(3B) Condition B is met if—
	(a) there are at that time two or more persons who—(i) fall within section 43(6)(b) or (c), and(ii) are connected with, or associates of, each other, and(b) the aggregate value at that time of the resources of the persons who fall within paragraph (a) (or any of them) is not less than the relevant deficit."
	(3) In subsection (4), for "subsection (3)" substitute "subsections (3) to (3B)".
	Effect of amendments made by this Schedule
	15 (1) The amendments made by paragraphs 2, 6 and 7 have effect in relation to any act occurring, or any failure to act first occurring, on or after 14 April 2008.
	(2) The amendments made by paragraph 8 have effect—
	(a) for the purposes of the material detriment test, where at least one of the acts or failures to act occurs or first occurs on or after 14 April 2008, and(b) for all other purposes, where at least one of the acts or failures to act occurs or first occurs on or after the day on which this Act is passed.
	(3) The amendments made by paragraphs 9 and 10 have effect in relation to any case where rights are transferred or extinguished on or after 14 April 2008.
	(4) The amendment made by paragraph 14 has effect so as to enable the Pensions Regulator to make a financial support direction under section 43 of that Act by reference to any time falling on or after 14 April 2008.
	Transitional provision
	16 (1) In the case of the first set of regulations made under subsection (8) of section 39B, subsection (10)(a) of that section has effect as if for the words from "the date" to "the regulations" there were substituted "20 October 2008".
	(2) In the case of the first set of regulations made under subsection (8) of section 43B, subsection (10)(a) of that section has effect as if for the words from "the date" to "the regulations" there were substituted "20 October 2008.""

Lord McKenzie of Luton: My Lords, I beg to move.

Lord Lucas: moved, as an amendment to Amendment No. 78B, Amendment No. 78C:
	Before Schedule 9, line 9, leave out from "etc.)," to end of line 11 and insert "at the beginning insert "the material detriment test is met in relation to the act or failure (see section 38A) or"."

Lord Lucas: My Lords, in moving Amendment No. 78C, I shall speak also to the other amendments in the group. This amendment is to raise the first question on the material detriment section: why should it be the opinion of the regulator that determines what is material detriment, rather than the facts? I beg to move.

Baroness Noakes: My Lords, I have two amendments in this group, which ask precisely the same question.

Lord McKenzie of Luton: My Lords, I recognise that a number of the amendments in this group seek to build greater objectivity into the material detriment test. Therefore, I shall speak to Amendments Nos. 78C, 78D, 78E, 78F and 78AH. I understand the concerns. The material detriment test is broader than the current grounds for contribution notices, which are based on evidence of intent. That is why we have built appropriate targeting measures into the proposed legislation.
	Our amendments have refined the application of the material detriment test. For example, we will require the regulator to issue a code of practice setting out when it expects to apply the test. However, we believe that the regulator's discretion is the most appropriate basis for this test, not just for the Government but for the industry and trustees. Granting discretion is not principally about allowing the regulator latitude, it is about creating a system that functions effectively for all.
	Amendments Nos. 78C and 78D would mean that the regulator could not be of the opinion that the material detriment test had been met, or that certain matters were relevant in considering an issue. Amendments Nos. 78E, 78F and 78AH would remove the regulator's discretion when deciding what factors it must have regard to when deciding whether the material detriment test was met. The consequence of these amendments would be that the determination of these issues would, therefore, move into the arena of the court. Precedent would have to be established through case law by the courts. This would be costly and time-consuming for employers and the regulator.
	Currently, the regulator can arrive at decisions more quickly and cost effectively, and the regulated community can build up an understanding of the regulator's approach. These amendments would, in effect, result in making the regulator something more akin to a prosecuting examiner and would severely limit the effectiveness of the material detriment test and its influence on behaviours in the market. It is also worth stressing that this flexibility is not just for the benefit of trustees, it works in the employers' favour, and experience has demonstrated this in practice.
	We understand from the regulator that there are specific instances where employers have been able to draw further factors to the regulator's attention and have affected the outcome of the case. In certain situations, the regulator concluded that action was not appropriate. Indeed, there are a number of instances in legislation where it is for the regulator to decide what is relevant and where the regulator's opinion is the basis for decision making. These provisions work well. Experience has shown that employers, trustees and others have been able to build up reliable experience of what the regulator was likely to view as relevant.
	I understand noble Lords' desire to improve the objectivity of decision-making, but I do not believe that it is their intention to replace the current approach with a protracted and expensive process whereby, for example, every clearance application would need to be considered by a court. That would be impractical and unnecessary. The current approach is working well and, as I said earlier, we have introduced further targeting with regard to material detriment.
	I hope that that has reassured both noble Lords and that they will withdraw their amendments.

Lord Lucas: My Lords, this serves to illustrate what I said when we were talking about the Government's amendments—that we are talking about convenience, rather than justice. It may well suit those who indulge in the sort of transactions that are described in the code, whereby convenience should be placed above justice, because they will be able to negotiate in those circumstances and know the rules that they are playing by. However, we should not contemplate letting out onto the wider public this rule that the decision on what constitutes material detriment should be decided by someone against people for whom there would be almost no effective right of appeal.
	Keeping these questions within the bounds of the code becomes very important when we have allowed such latitude, because we believe that those bounds will be kept to. It will be important that going beyond code will happen only in the most exceptional circumstances and that we should not let that grow up as a casual operation because we are allowing the regulator a position that is not appropriate in wider forum. I beg leave to withdraw the amendment.

Amendment No. 78C, as an amendment to Amendment No. 78B, by leave, withdrawn.
	[Amendment No. 78D, as an amendment to Amendment No. 78B, not moved.]

Baroness Noakes: moved, as an amendment to Amendment No. 78B, Amendment No. 78DA:
	Before Schedule 9, line 20, at end insert—
	"( ) The Regulator shall issue guidance setting out how it intends to define "material" and "likelihood" for the purposes of subsection (1)."

Baroness Noakes: My Lords, this amendment also concerns the material detriment test and asks the regulator to issue guidance on how it intends to define "material" and "likelihood". This issue has been raised with us by some of the people involved in the development of the Government's new proposals.
	Perhaps I may start with the issue of materiality. The Minister will be aware from his own background that in the accountancy world materiality is a relatively well understood concept and that various rules of thumb are issued from time to time on what constitutes materiality. Normally, people talk of 5 to 10 per cent as being potentially material either for recognition or for reporting.
	My reason for tabling the amendment is to find out what the Government intend when they talk about scheme benefits being affected detrimentally in a material way. Scheme deficits are very volatile. We can see from recent Stock Exchange market movements that deficits move around considerably at any point in time—certainly way beyond 5 or 10 per cent. Other factors that lead to significant variability include valuations, the discounting of liabilities and things such as longevity. Therefore, many things can change deficits quite a lot, and that is without any acts in relation to the scheme that may or may not have a material detriment on it. Therefore, the purpose of the amendment is to ask the Government what they mean by material detriment.
	Linked to that is the question of what they mean by "likelihood". Is this determined on a balance of probabilities, whereby we have to work out whether it is more likely than not that there will be a negative impact on the scheme, or is the threshold lower than a balance of probabilities?
	Because "likelihood" and "materiality" are both crucial parts of the formulation of the test in the new clauses in which the test is being introduced, there is concern in the business community about what these concepts mean in practice and how people should calibrate their understanding of the effect of their actions. People need to know whether they should be seeking clearances or taking other action. Obviously, the existence of the defence is very useful, but unless we can make some sense of "materiality" and "likelihood", they are not useful concepts at all. I beg to move.

Lord McKenzie of Luton: My Lords, I hope that I can partially satisfy the noble Baroness's inquiry. She emphasised the importance of there being a clear understanding among employers, trustees, regulators and others of the meaning of the key concepts of "materiality" and "likelihood". I very much agree. I share her concern that these issues should be clear and I know that the regulator appreciates the importance of clarity in these matters.
	The regulator's clearance guidance currently deals with materiality. For example, paragraphs 46 and 47 set out how employers and trustees should decide whether a weakening of employer covenant is material, considering issues such as the amount by which the covenant is weakened, the size of the employer after the event, the size of the pension scheme and the size of the deficit in the pension scheme. I know that industry stakeholders find this guidance helpful. However, I am also aware that the regulator has stated that it will need to update and add to its clearance guidance in relation to the new test and to the defence in order to produce clarity in respect of the concepts of "materiality" and "likelihood". As I said, we appreciate that the clearance guidance will need to be reviewed and amended. The regulator has undertaken to do that, and it will address, in particular, the issue of 'likelihood', which is not currently covered in the guidance.
	If the noble Baroness will permit me, I shall refrain from offering my own homespun view on those concepts. There must be a proper process and there has to be clarity, and I believe that that is something in which the regulator will engage.

Baroness Noakes: My Lords, that response is entirely satisfactory. If the regulator is going to ensure that his guidance on materiality will be updated to reflect the material detriment test and will cover likelihood, that is what my amendment, in effect, asks for. I beg leave to withdraw the amendment.

Amendment No. 78DA, as an amendment to Amendment No. 78B, by leave, withdrawn.

Baroness Noakes: moved, as an amendment to Amendment No. 78B, Amendment No. 78DB:
	Before Schedule 9, line 30, leave out from "time" to end of line 31 and insert "at the end of that period"

Baroness Noakes: My Lords, I shall speak also to Amendment No. 78AKA. These are probing amendments concerned with the regulator's discretion about time periods. Whether there is a material detriment has to be tested at the relevant time which, in the case of a failure to act, can be over whatever time the regulator chooses. My amendment means that the regulator would have to test the effect of failure over a period of time at the end of the period. Amendment No. 78AKA deletes new subsection (4A) of Section 39 of the 2004 Act, which has the same regulator judgment in respect of a series of acts or failures. In other places, we have certainty about timing. Under new Section 38A(3) where there is a series of acts or failures, the last act or failure is the relevant time, but not here, where we have a single failure to act.
	The issue that has been raised with me is cherry picking. We live in volatile economic times, as I said in the context of the previous amendment. Deficits can vary significantly from week to week. If we look at the aggregate information published by the PPF, the aggregate deficits of the funds in 7800 index more than doubled to £80 billion between August and September, and I hate to think what October's figures will show. Individual schemes, depending on their asset mix, can show greater movements than that. Why should the regulator be given this discretion to choose which period of time he will use? To those who have suggested this to us, it gives him too great an ability to choose the point in time when the figures show the worst position. I beg to move.

Lord McKenzie of Luton: My Lords, these amendments remove the regulator's ability to determine the relevant time for a failure to act that lasted over a period of time and for a series of acts. The first amendment states that in relation to a failure to act that continued for a period, the relevant time should be at the end of that period, but that would not work where that period had not come to an end. That could open up a loophole, in that the regulator would be prevented from issuing a contribution notice in an otherwise appropriate case, simply because the person was party to a failure to act, and that failure was ongoing and potentially never ending. The second amendment would make it unclear how to determine relevant time at all in relation to a series of acts or failures, which would create new uncertainty for business.
	I consider that it is right for the regulator to have discretion here, but its public law duties to be reasonable mean that it can take into account representations about the meaning of relevant time in particular cases. The regulator remains available to discuss whether transactions should come for clearance and will be updating its clearance guidance in the light of these amendments. The regulator already has discretion under Section 39(4)(b)(ii) of the 2004 Act to determine the relevant time for a failure to act that continues over a period, and the relevant time here is used to calculate the debt under Section 75 of the 1995 Act, which is the upper limit of the amount of the contribution notice. A series of acts or failures is also likely to continue over a period and therefore there needs to be a similar method of calculation, but it is particularly to address the issue that if we are talking about failures to act, rather than acts that are positive events, they could continue unabated and there would never be a trigger for the relevant time. That is why we believe it is important, subject to the bounds of what is reasonable and the broader public duties imposed on the regulator, to have that discretion.

Baroness Noakes: My Lords, this may be a convenient time to probe the question of acting reasonably, which I know will come up rather a lot—indeed, the Minister has already referred to it. As I understand it, the concept of reasonableness relates to the duties of the regulator, which in turn relate to protecting pensions and the interests of the PPF—I forget the exact formulation. It is not the duty of the regulator to protect the interests of employers, for example. The question of acting reasonably therefore needs to be construed in the context of the regulator's own duties and not in the context of broad fairness or equity; that is not the concept in administrative law. I should like the Minister to say a little about what he means by "reasonably".

Lord McKenzie of Luton: My Lords, the noble Baroness makes an interesting and challenging point. In the application of the code that we discussed earlier, for example, it would be incumbent on the regulator to act reasonably. I think that the noble Baroness has bowled a bit of a fast ball, so perhaps I may reflect a little on a fuller answer to the question that she raises, which I think is a fair one.

Baroness Noakes: My Lords, I look forward to continuing this discussion with the Minister, perhaps at Third Reading. I take his point that, if an act is continuing, there has to be a time. I was not suggesting that the regulator could never act; I was suggesting that the regulator should not be able to cherry pick a time. That takes us back to whether the regulator is acting reasonably. Perhaps it is in that context that we should resume our discussions. I beg leave to withdraw the amendment.

Amendment No. 78DB, as an amendment to Amendment No. 78B, by leave, withdrawn.
	[Amendments Nos. 78E and 78F, as amendments to Amendment No. 78B, not moved.]

Baroness Noakes: moved, as an amendment to Amendment No. 78B, Amendment No. 78FA:
	Before Schedule 9, line 53, at end insert—
	"( ) guidance issued by the Regulator in force at the relevant time concerning the circumstances in which it is appropriate to apply for clearance,"

Baroness Noakes: My Lords, I hope that this amendment will not take long. The Minister said in his opening remarks that, if a clearance had been given, that would bind the regulator, including on the material detriment test; in other words, if a clearance had already been given, that would be the end of the matter. The question posed by my amendment is what happens when, in the light of the guidance for clearance applications, an employer or another person has chosen not to apply for clearance. The amendment suggests that one of the factors that the regulator should consider—not a determining factor, but one of the factors that should be determined—is whether the person was acting in accordance with guidance that existed at the time of the act. That is the simple question that my amendment puts. I beg to move.

Lord McKenzie of Luton: My Lords, the noble Baroness seeks clarification that the regulator will consider the guidance available to a party at the time of an act if considering a contribution notice on grounds of material detriment in respect of that act. I agree that the parties should have certainty that changes to the regulator's guidance that take effect after a party has taken a particular decision cannot be considered by the regulator if it examines that decision. The regulator is already bound by public law obligations to have regard to all relevant considerations when determining whether or not to issue a contribution notice on grounds of material detriment. This would include any guidance that was in effect at the time and would not include any guidance that was not in effect at the time.
	I hope that, in a roundabout way, this addresses the point that the noble Baroness is stressing. The proposition is that someone looked at the guidance at the time and decided that they did not need to apply for clearance because they were safe in the terms of that guidance. I should have thought that that provided the protections that the employer or person would need. Again, I should like to think a little more about that to ensure that the specific point raised by the noble Baroness is covered. I understand the import of it. If somebody has refrained from going for a clearance that would have been available to them relying on the guidance, I am then trying to see the circumstances in which that could give rise to a contribution notice, given the filters that are there, including references in the amendment to "have regard to" and reasonableness.
	I should have thought that that would offer the appropriate protection. If the noble Baroness will permit me, I will reflect again on that because these are intricate questions and I do not want to mislead as I know people are relying on what we are placing on the record.

Baroness Noakes: I thank the Minister for his response, and am happy to proceed on the basis that he has suggested. I hope that between now and Report we can sort this out, and if necessary retable it for a better statement to be made at the Dispatch Box. I beg leave to withdraw the amendment.

Amendment No. 78F, as an amendment to Amendment No. 78B, by leave, withdrawn.

Lord Lucas: moved, as an amendment to Amendment No. 78B, Amendment No. 78G:
	Before Schedule 9, leave out line 54

Lord Lucas: I shall also speak to Amendments Nos. 78H and 78AA. In each case I have two questions. First, what does the Minister envisage doing with these powers? Secondly, can he assure me that an act by the person, even if it is judged many years later by the regulator, will be judged in relation to the law as it then subsisted? In other words, will there be no trace of retrospection left in these powers?
	Amendment No. 78G would remove proposed new Section 38A(4)(g), which I should have thought the Minister would be inclined to accept as the regulations in line 89 of the proposed new section could do that job just as well. There is a duplication of regulation-making powers. It is important that the changes are made in a clear and open way so that everyone knows what is happening and no one is caught by surprise. I am seeking clarification and explanation more than listening to myself going on. I beg to move.

Lord McKenzie of Luton: When we discussed the regulator's powers in Committee I made a commitment to consider what more could be put in the Bill. This undertaking has been met, but it is necessary to have some residual regulation-making powers, which the noble Lord's amendment would remove. These regulation-making powers are proposed so that the Government can adapt legislation to new risks and review in the light of operational experience. However, the Government do not intend to use the power to reframe the statutory defence. These are residual powers taken to deal with unforeseen circumstances. This is an important safeguard in a fast-evolving market. Business is also served as the Government would be able to amend the factors or the defence if they had unforeseen effects, and to protect PPF levy payers from risks .
	The regulator will act within the boundaries set out in the Bill. Should these be found to be inappropriate at a later time, or to not cover all risks, the regulator must follow due process to change them by affirmative procedure. The significant refinements we have developed in consultation with some key representative stakeholder over the summer fully explored the proposed legislation including these powers, and the balance was considered to be right.
	I understand the noble Lord's concern in our earlier discussions about retrospection and whether clearance statements could be overturned as a result of these amendments. Perhaps I can reassure him on the following points.
	Should any changes be made as a result of the powers, they would not have retrospective effect; no act that occurred before any changes came into force would be considered under the changes; no clearance application would be reopened as a result of the changes to the legislation. I hope that those specific assurances will satisfy the noble Lord.

Lord Lucas: My Lords, I think that that comes within the general rubric of, "Let's hope it goes well". I just leave with the Minister the thought that the power in line 54 seems to me to be entirely contained within the power in line 89. If that is not so, I should like to know what extra it is doing, but perhaps not now. I beg leave to withdraw the amendment.

Amendment No. 78G, as an amendment to Amendment No. 78B, by leave, withdrawn.
	[Amendments Nos. 78H and 78J, as amendments to Amendment No. 78B,not moved.]

Lord Lucas: moved, as an amendment to Amendment No. 78B, Amendment No. 78K:
	Before Schedule 9, line 90, leave out "issued by reference to material detriment test: defence" and insert ": supplementary"

Lord Lucas: My Lords, the amendments concern what we might call the defence. The Minister may be glad to know that I shall not move amendments in the groups led by Amendments Nos. 78R and 78S, which seem to me to cover mostly supplementary matters with which we can deal in discussion on this group, although if he wants to raise any matters in his notes and waves at me desperately, I will also move them so that he can talk about them. For some reason, I think that all the consequential amendments have been bundled into another couple of groups rather than chucked in here.

Lord McKenzie of Luton: My Lords, I did not quite hear what the noble Lord said.

Lord Lucas: My Lords, the groups led by Amendments Nos. 78R and 78S seem to me to be entirely composed of consequential amendments that should have been tacked on to this group. If the noble Lord has found something wonderful to say about them, he need only wave me and I will give him a chance to do so by moving them.
	The amendments propose various ways in which the defence may be improved. It seems odd that the defence should not be triggered until a warning notice has been issued. By that stage, the procedure is already well advanced and the person subject to it may feel themselves to be on the back foot.
	The next question is whether the defence covers only contribution notices based on the material detriment test or whether it will cover also those issued under Section 38(5)(ii) of the Pensions Act 2004 where, again, the Government do not seem to have applied the new defence to those contribution notices.
	Other than that, we are dealing again with the general question of whether it is fair to place on an individual the requirement that he has documented his past in quite the detail required to comply to make the defence viable. If the question that arises is within the code as currently drafted, I do not see the problem. It arises only with matters outside. I can happily leave that, because it is a matter where I am already taking things on trust. I beg to move.

Baroness Noakes: My Lords, I shall speak to my amendment No. 78PA in the group, which is a probing amendment to try to tease out how hindsight might be used in the context of the defence.
	I am aware that subsection (5) of the defence clause refers to prevailing circumstances at the time. Clearly that is quite helpful, but there is considerable concern that people against whom the regulator will use these new powers may have a rather hazy memory about what they did in the past and, indeed, may not have access to papers. That may cause a problem, because the regulator will have absolute clarity about how things have turned out.
	Let me give an example. A person carrying out a commercial transaction in good faith uses some kind of financial innovation, but not to avoid pension liabilities. Subsequently, that same innovation is used to consciously detrimental effect. To what extent will the original transaction be damned by the later use of a particular technique? My amendment would not eliminate that problem, but it might make the business community more certain about how the regulator will judge the effect of particular circumstances, given that hindsight is a very difficult thing to avoid using when reaching judgments.

Lord McKenzie of Luton: My Lords, Amendments Nos. 78K to 78M, 78W and 78PA relate to the statutory defence relating to the new material detriment test for contribution notices. I have already set out in some detail the background, or rationale, for the new test and the defence. I have also discussed the important safeguards that will continue to apply to the use of the second limb for contribution notices and how we are reinforcing the factors that the regulator must consider. Our approach will provide a proportionate level of protection for individuals and others. In this context, the amendments are simply unnecessary, as they would also produce undesirable outcomes for the industry and the regulator.
	Three key issues relate to Amendment No. 78K, tabled by the noble Lord, Lord Lucas. They would widen the defence so that it applied to the second limb of the existing main purpose test for the use of contribution notices. This would give rise to a disjunct between the test and the defence. The former is based on intent, but the latter would be based on an effect of material detriment. This would be impractical and expensive to operate for the regulator and the industry, and one cannot reasonably apply that defence to the test of intent. They would remove the trigger of the warning notice to the application of the defence, and in doing so take away an important procedural reference point—to which consultees, including the CBI, the BVCA and the APL, were attracted—which permits use of the defence from the outset of the process. The final part of the amendment would set out an objective test for where a contribution notice cannot be issued: that is, the circumstances in which the defence would be successful. It would also remove the reference to the defendant having to show that the conditions for the defence are met. This would be cumbersome, would increase costs and could severely limit the regulator's function to protect members' benefits and their PPF.
	Again on the warning notice, obviously it would be prudent for individuals involved in transactions to seek to ensure that their due diligence was done routinely, as it would be in a transaction that was an integral part of a restructuring. The fact that the warning notice may come later should not preclude that from happening ab initio. I understand that it is important to have a warning notice because there must be a defence against something, and the warning notice would technically be the trigger. I hope that that helps the noble Lord.
	With regard to Amendment No. 78PA, the noble Baroness has raised the important issue of the potential use of hindsight in relation to decisions made by the regulator. A number of consultees have discussed with us the need to ensure that the regulator cannot make judgments with the benefit of hindsight. We agree that it would be unfair for the regulator to use information that could not have been known at the time. The amendments tabled in my name achieve this in new Section 38B(5) and the legislation clearly refers to,
	"having regard to all relevant circumstances prevailing at the relevant time".
	The effect is that the regulator cannot look at circumstances that arise after the time in question; he can look only at the contemporaneous evidence. If a person was concerned that the regulator's decision used hindsight, they would be able to challenge that decision through the Pensions Regulator Tribunal. The regulator has already said that it will update its guidance to take account of the new test, particularly the statutory defence, and it will no doubt address this point if necessary. I hope that that has produced clarity in relation to the instance outlined by the noble Baroness. The fact that an instrument or technique subsequently attracted negative comment or connotations would not be visited back on the circumstances of an earlier transaction when it did not colour the judgment about material detriment at the time.
	I take this opportunity to go back to the question of the reasonableness of the regulator to save myself and my officials the need to send a letter in due course. We have talked about the importance of the regulator behaving reasonably and the question of how such reasonableness is to be judged. There are several issues that I should like to draw out here: the regulator's duties in legislation, the public law obligations on a body such as the regulator and the impact of statements, guidance and codes issued by the regulator, and the body of previous decisions made by the regulator. The powers of the regulator are set out in legislation, including the main statutory objectives, but the regulator does not have carte blanche to behave unreasonably in pursuit of those objectives.
	For example, in deciding whether to issue a contribution notice, the regulator is required by Section 38(7) to,
	"have regard to such matters as it considers relevant".
	Attorneys to the public law duties of the regulator have observed that the regulator's status as a public authority places demanding standards on its decision-making as a result of both domestic and EU law, and in broad terms a public authority would be acting unreasonably if it took account of factors that were not relevant, failed to take account of relevant factors, or reached a conclusion that was so unreasonable that no reasonable authority could have reached it—so-called Wednesbury unreasonableness.
	Finally, I come to the legitimate expectations created when a public authority such as the Pensions Regulator makes statements, issues codes or guidance and builds a track record of decision-making. If the regulator has made statements about the way it would use its powers and then diverges from that approach without good reason, it is likely to be behaving unreasonably, and where those statements were contained in a statutory code of practice that had been approved by the Secretary of State, laid before Parliament and brought into force by an appointed day order, the regulator would need a strong justification for going against a code that had passed through a parliamentary procedure.
	Clear justification would also be needed to go against the legitimate expectations created by its statements. While the regulator must examine each case on its own merits, legitimate expectations can also be built up by a corpus of decisions made by the regulator, so if the regulator typically viewed an issue in one way and then took a radically different approach in a near identical case to others it has considered, it would be likely to be acting unreasonably. If the regulator needed to revise expectations, it would need to make a statement that clarified its position, but this statement could not have retrospective effect. The regulator would have to judge any enforcement activity against the law of guidance and the legitimate expectations in place at the time a particular act or failure to act occurred. Given our previous discussion on amendments, I hope that noble Lords will forgive me for dwelling briefly on an effort to clarify issues of reasonableness as well as dealing with the specific amendments.

Lord Lucas: My Lords, I am grateful for that answer. The only problem is that my understanding is that the requirement for the regulator to be reasonable is limited by the regulator's functions and powers. In other words, the regulator has to be reasonable only in respect of what it is required by statute to do, which is to look out for the interests of the fund and the pensioners. It has no duties imposed on it with respect to other parties such as the company running the fund or, as it were, the company whose pensioners are being looked after, or other parties who might be involved, such as individuals. So the duty of reasonableness does not extend to them. Where the regulator is required to judge whether something is reasonable, that is, of course, an overall reasonableness; but where the regulator might be required to be reasonable, that is a limited protection for a third party, such as an individual, who might find themselves caught up in it. My understanding is that there is little point in their placing reliance on that because the regulator can do what it likes without tripping over unreasonableness; the regulator is not required to be reasonable in respect of functions which it does not have.
	The Minister was painting a rosy picture. If he wishes to say anything else, I should be delighted; otherwise I may wish to return to that point later.

Lord McKenzie of Luton: My Lords, as we are going to rise shortly, perhaps I may write to the noble Lord and the noble Baroness. The position is broader than the noble Lord has outlined and if we get clarity in writing it would be beneficial all round.

Lord Lucas: My Lords, in that circumstance, I am delighted to withdraw my amendment.

Amendment No. 78K, as an amendment to Amendment No. 78B, by leave, withdrawn.
	[Amendments Nos. 78L and 78M, as amendments to Amendment No. 78B, not moved.]

Baroness Noakes: moved, as an amendment to Amendment No. 78B, Amendment No. 78N:
	Before Schedule 9, line 106, leave out "might detrimentally affect" and insert "was likely detrimentally to affect"

Baroness Noakes: My Lords, the amendment seeks to amend condition A in the defence section, the new Section 38B. If the defence is to be established, a person has to show that due consideration has been given to the extent to which an act or failure "might" detrimentally affect in a material way the receipt of scheme benefits. The amendment seeks to change that requirement so that the person has to show that there was consideration of the extent to which the act or failure was "likely" to affect scheme benefits.
	I have tabled the amendment because all kinds of things "might" affect scheme benefits. If in routine business decision-making a scenario analysis is undertaken, this involves the construction of internally consistent scenarios which might not be considered to be likely outcomes but which test robustness against extreme conditions. An extreme scenario looked at two years ago could well have foreseen the virtual seizing up of credit markets, bank liquidity and the failure or nationalisation of half the financial services industry. On that scenario, one could easily reach a conclusion that, for example, bank dividend policies "might" detrimentally affect their pension schemes. However, looked at two years ago it was not "likely" that they would, but a plausible analysis could have shown that they would. So anything that might affect a pension benefit is too extreme a test; a fairer test is "likelihood".
	This may come back to an understanding of what "due consideration" means for the purposes of condition A, which is what Amendment No. 78Q in the name of my noble friend Lord Lucas seeks to develop in the context of an objective test, but it might not. I beg to move.

Lord Lucas: My Lords, my noble friend's amendment is very important. If the noble Lord has not yet read Black Swan by Nassim Nicholas Taleb, he will enjoy doing so, but the difference between "might" and "is likely to" is an example of the difference between the real world and the world as we construct it in projections. You cannot ask a manager or someone involved in taking decisions to predict the future with accuracy but you can ask them to make reasonable projections—and projections are all about likelihood. That is all that a manager is able to know. He must ask himself, "Knowing what I know at the moment and making assumptions about the future, is this likely to have a detrimental affect?". That is the limit of what you can ask someone to do. To know whether it might is to say that they can tell what extraordinary and unexpected events might be waiting around the corner to happen. When you are projecting one of these things, you might run one of these tests where you choose all sorts of scenarios, going wide and going short, and you look at all the results that might happen and place various likelihoods on them. You come up with a central band of projections, and that is the band you feel you are likely to fall within—but the "mights" go right out to the wings, to the projections where you make vast profits or vast losses. If you are using the word "might", you are really saying that almost any transaction of any size might have this effect and you are not discriminating in a way that is reasonable or should be the Government's aim. I am with my noble friend on the wording of her amendment.
	Mine is much less significant. It says that if someone has failed to keep the proper paperwork, they should not be penalised if, had they kept the proper paperwork, it would have made no difference to the decision they made.

Lord McKenzie of Luton: My Lords, we are dealing with amendments relating to the statutory defence. It is important that the defence is operable for employers and other parties who could be subject to contribution notices, but does not prevent the regulator acting where that is appropriate. Certainty about the meaning of the defence is central to achieving that.
	The noble Baroness's amendment would create uncertainty about the meaning of the definitions. Who would judge whether detriment was likely? Uncertainty would not be welcomed by employers who might well feel the need to go to court for certainty, and that would place an impractical burden on the regulator. The requirement in condition A is that,
	"before becoming a party to the act or failure, P gave due consideration to the extent to which the act or failure might detrimentally affect in a material way the likelihood of accrued scheme benefits being received".
	That is a reasonable and appropriate test to make. If one is introducing the concept of "likely detrimentally to affect in a material way", does that not effectively introduce a third-party judgment to the process? That would not be right.
	The amendment of the noble Lord, Lord Lucas, raises important issues and I can see that there is a serious question about the level of due diligence. I hope my earlier explanation of the Government's intention behind the defence has satisfied him on that issue. His amendment would permit a defence on condition A on the basis of a person's conclusions, regardless of whether they had actually made the inquiries, and done the other acts, that a reasonably diligent person would have made or done in the circumstances. That may produce cost efficiencies for the party, but it would create significant risks for members' benefits and the PPF if those conclusions turned out to be incorrect. It would also send an inappropriate message to the market about the importance of due diligence. For those reasons, I hope the amendments will be withdrawn.
	On the issue of dividends, these are not within the circumstances set out in the draft code and would be outside the test for the contribution notice.

Lord Oakeshott of Seagrove Bay: My Lords, I have been thinking carefully about what the noble Lord, Lord Lucas, said. Does the Minister agree with me that there is a large difference in Amendment No. 78N between "might detrimentally affect" and "was likely detrimentally to affect"? "Was likely to" almost introduces an element of probability—I would have certainly thought that it was about 50/50. That is a world away from "might", and I think it goes too far.

Lord McKenzie of Luton: My Lords, I think I agree with the noble Lord.

Baroness Noakes: My Lords, I am grateful for the support from my noble friend Lord Lucas on the difference between "might" and "likely". We disagree with the noble Lord, Lord Oakeshott; in the business world, it is normal to proceed on the basis of what is likely to happen and not of stress-testing for things that might conceivably happen. Whether or not my alternative formulation is the right one, I am not absolutely sure, but I am very uncomfortable with the use of the "might" formulation. The Minister said that my test introduced uncertainty. I suggest that requiring companies to have to prove material detriment in the context of considering all possible "mights" is imposing a potentially impossible test for people to satisfy in order to establish this defence.
	The Minister knocked down my example because dividends are not in the draft code, a fact of which I am well aware. However, we all know that the draft code might not be absolutely conclusive. My point was really to draw out how scenario analysis and acts can be put alongside each other and the difference that can be had from analysing from a "might" and a "likelihood" perspective.
	I am not entirely happy with what the Minister has said, but I should like to consider it carefully because now is not the time to press this any further. On that basis, I beg leave to withdraw the amendment.

Amendment No. 78N, as an amendment to Amendment No. 78B, by leave, withdrawn.

Baroness Noakes: moved, as an amendment to Amendment No. 78B, Amendment No. 78NA:
	Before Schedule 9, line 110, after "P" insert "or any other persons"

Baroness Noakes: My Lords, this would amend condition B of the material detriment defence. Under condition B, if there is a potential detrimental effect, P has to take all reasonable steps. My amendment says that the steps could be taken by P "or any other persons". This is not a particularly good amendment; it was drafted on Friday to meet the tabling deadline. It should have said, "by any other person or persons". More importantly, there are other points in Section 38, such as whether we are considering P alone or looking at what other persons have done.
	In the defence section, P is given a way of showing that it is not reasonable to issue a contribution notice because he has carried out due diligence and taken reasonable steps on that basis. Why is it necessary for P himself to have carried out the due diligence and taken all the steps that are necessary? If two parties are involved, why is it necessary for each of them to have carried out all the steps? Why is it not reasonable for P to look at what others are doing and not necessarily take action himself? My amendment would reflect the commercial reality of avoiding duplication in transactions. Provided that someone has done due diligence and/or taken actions, that ought to be the end of the story. I beg to move.

Lord McKenzie of Luton: My Lords, as explained, the purpose of the amendment is to provide that somebody other than the person raising the defence might be the one to mitigate the detriment. However, this is unnecessary. The legislation does not require the person raising the defence to mitigate the detriment; rather, it requires the defendant to ensure that he or she takes reasonable steps to ensure that there is an appropriate mitigation in place. Therefore, if the mitigation is to be undertaken by someone other than the defendant, then the reasonable step the defendant can take is to ensure that there is an appropriate mitigation and that it is in place. I do not think that the amendment adds anything to the Government's proposals. I hope that that has produced some clarification for the noble Baroness.

Baroness Noakes: My Lords, I will consider that carefully in the light of the representations made to us. The Minister is reading the proposed new section differently from the way in which it has been read by those who contacted us. For today, I beg leave to withdraw the amendment.

Amendment No. 78NA, as an amendment to Amendment No. 78B, by leave, withdrawn.

Baroness Noakes: moved, as an amendment to Amendment No. 78B, Amendment No. 78P:
	Before Schedule 9, line 110, leave out "all reasonable steps to" and insert "steps which would reasonably"

Baroness Noakes: My Lords, the amendment focuses on condition B. Condition B kicks in if, as a result of condition A, it is considered that the act or failure might have a detrimental effect. P has to take,
	"all reasonable steps to eliminate or minimise the potential detrimental effects".
	My amendment would replace the concept of taking "all" steps with one based on taking steps which would reasonably eliminate or minimise the detrimental effects.
	Why is a person expected to take all possible steps? Is a belt-and-braces approach mandated as a necessary precondition to establishing the defence? Surely it is only reasonable that the person applies reasonable mitigation. For example, if the transaction might result in a potential deficit, is it necessary for the person to make additional contributions and provide other financial support such as guarantees, or can they take just some of those steps? Is it absolutely necessary to do everything that could possibly be done, or is it enough to take reasonable steps? I beg to move.

Lord McKenzie of Luton: My Lords, the amendment would strengthen the statutory defence in favour of the person who could be subject to a contribution notice issued under the material detriment test. It would limit the regulator by strengthening P's defence in relation to condition B, enabling them to show that they had taken "steps which would reasonably" eliminate or minimise potential detriment, rather than "all reasonable steps".
	It is important for the operation of the defence that P should be able to show that he or she has taken all reasonable steps, not the likelihood of the steps taken eliminating or minimising the potential risk. If the defence was amended as the noble Baroness suggests, it would make it unclear who would judge whether the steps taken were indeed "steps which would reasonably" eliminate or minimise potential detriment, which would make it much harder for parties and the regulator to operate. Parties might need to seek the view of the court as to whether they had taken "steps which would reasonably" eliminate or minimise potential detriment. This could be costly and unnecessary.
	The intention is not that the defendant should have to take every step possible. Once P was satisfied that the potential detriment was minimised or eliminated, there would be no more reasonable steps for them to take. On this basis, and in light of my earlier explanation of the Government's thinking behind the statutory defence, I hope that the amendment will be withdrawn. I hope that the noble Baroness will take comfort from that level of assurance.

Baroness Noakes: My Lords, my brain is slowing up at this hour. I think that what the Minister said is a good answer to the point that I put to him, but I reserve the right to read it in Hansard and think about it further. I beg leave to withdraw the amendment.

Amendment No. 78P, as an amendment to Amendment No. 78B, by leave, withdrawn.
	[Amendments Nos. 78PA to 78T, as amendments to Amendment No. 78B, not moved.]
	House adjourned at 10.24 pm.